Financial Services and Markets Bill

Debate between Baroness Bowles of Berkhamsted and Lord Jackson of Peterborough

Committee stage
Monday 13th March 2023 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I may have had the unique experience among us here of having to chair the committees that did some of the anti-money laundering directives. It is right that the noble Lord, Lord Moylan, points at the origins and the fact that we have carried through some things that were not necessary.

We have to go back to where it all began. He was quite right that it was with the Financial Action Task Force, which related to foreign nationals. We had a problem in the EU with what that meant—foreign vis-à-vis the EU—and tried hard to construct ways in which we could exempt the whole of the EU. There were words that would do that, but they did not get past the civil liberties committee people. We kept running up against being told that we could not discriminate. It was very difficult, because two committees were involved—my committee, the Committee on Economic and Monetary Affairs, and the civil liberties committee. Most of the time, because we were a bigger committee, we managed to outvote the civil liberties people, but there were one or two places where they had unique responsibility and, unfortunately, things such as discrimination were theirs, not ours.

I am telling this story because, if we want to solve this problem—if we say, “Okay, now we’ve had Brexit, we don’t need to stick to the rules that were made in the EU”—what can we do? Can we actually do what FATF said and discriminate within the UK against people who are in the UK but foreign? Where does that leave us with our discrimination laws? I cannot solve that, but I wonder whether the Minister knows the answer—because if the answer is that we are not hidebound and can do what FATF said, let us do that and put the focus where it should be.

It is very difficult to do a risk-based approach. I am all for it, and I think that the banks should do more of it. However, as the noble Baroness, Lady Noakes, has explained, it is costly. In fact, these things are outsourced; you fill in all the forms, somebody somewhere else ticks the boxes and the bank jolly well does not know its client any better. Then two or three years later, they ask you for all the same forms again, and they do not notice if you have done it exactly the same.

When the anti-money laundering regulations first came out, we seemed to get up to speed in the UK very quickly, and we started getting all this rubbish very quickly. I got the Belgian versions, because I still had Belgian bank accounts. I got a nice little form with tick-boxes on, so I photocopied that and started sending it to some UK banks, asking them why they could not do the same thing, although it did not get me anywhere. Recently, all the EU banks have stepped up, and my son has had a lot of trouble with the Irish banks, because he was working in Ireland—and he had even more trouble once he was no longer working in Ireland and came back to the UK, even though he has Irish nationality. He has had to close his accounts, because he just could not operate them.

So there are some issues here that need to be handled. I thought, going through this and trying to remember the discussions we had, that the noble Lord, Lord Moylan, got the closest by saying that if they are already having some check, such as through the tax authority, then that is a proper and non-discriminatory way to take people out of it. It is hard to think of anything better than that, other than just taking everybody out.

It is true that these regulations were really meant for catching politicians in dodgy countries who had access to ways to bypass the normal systems and checks for moving large sums of money between countries—for pilfering it. It is very difficult to talk about who they might have been without having carefully prepared your notes—although I know we have parliamentary privilege. They were not meant to affect ordinary people. Under the FATFA provisions, it was never meant to be ordinary people or ordinary politicians in generally law-abiding countries, shall we say, where politicians are not given extraordinary access to start siphoning off money from the central bank and suchlike. I do not think there is anyone in our central bank who can do that—perhaps the chief cashier; I have not thought about that—but that is who they were meant for.

Like others, I do not have confidence that our regulators will necessarily break cover and do something dramatically new if we ask them to revise this. It will be a problem that they are entrenched in the rules they have and the thinking of the other regulators who they keep meeting when they go places. It needs something very clear in legislation—something like the amendment from the noble Lord, Lord Moylan, if we can check out the point about discrimination. It is very difficult for us, as PEPs, to vote on things such as this, but it is causing a lot of distress to a lot of people. It is potentially devastating when you cannot complete on your house purchase and such things, and when things are happening randomly. It needs to be attended to. I really do not see why the Government cannot put their foot down and say to the banks and regulators that this must be done in a way that truly reflects who the targets are.

[Lord Jackson of Peterborough (Con)]

I will speak very briefly in support of the amendment moved by my noble friend Lord Moylan and those spoken to by my noble friend Lady Noakes. All noble Lords have spoken very well, and there is clearly consensus here. The specific issue here has trundled on for 10 years. I remember that when I served as treasurer of the 1922 Committee, this was an issue taken up by both the then chairman and, as mentioned by the noble Baroness, Lady Hayter, by Sir Charles Walker. I naively believed that we had resolved this issue by about 2017-18; obviously, that is not what happened.

This is about the limits of a permissive regulatory regime. It is clear that the Treasury and the regulatory bodies involved have not taken a blind bit of notice of the cross-party support in Parliament. This is not a niche issue that affects just us. In my case, I was affected because I was told by my mortgage provider that I was not going to be permitted to make mortgage payments, let alone make any withdrawals from a bank account. But this is also an issue of the civil liberties of our family members and extended family members. On that basis, we must take a very tough stance.

I come back to the particular point from the noble Baroness, Lady Bowles, about what we have the ability to do now that we are outside the EU—although my noble friend Lord Kirkhope is right that we must not recapitulate the arguments about Brexit. The noble Baroness’s point was astute, in that there is no proper risk analysis and risk assessment of all of these individual cases. A generic policy is applied across all individuals.

Frankly, let us be honest: the UK is one of the most open and transparent political systems in the western world. The noble Baroness, Lady Fox, is absolutely right that people are not attracted to public service if the fallback position is, “You’re a liar, a cheat, a crook and a thief if you go into public service”. It is important that, after 10 years, we make that appropriate point.

If we do not adopt my noble friend Lord Moylan’s rather benign amendment, a future Government may well take a much more draconian approach to this, both for the regulators and for the individual financial institutions. On that basis, they have a vested interest in sorting this situation out because, when the Financial Action Task Force proposals were published in 2012, they were not about asking people like the noble Baroness, Lady Hayter, to produce a premium bond certificate from 1957—I scarcely believe that it was 1957; I thought it might be a lot later.

This is an opportunity, and I hope that my noble friend the Minister makes, or at least commits to, those changes. This is not the first time that I have been compared to a brothel keeper—although that is normally in the other House—but my noble friend Lord Moylan makes a good point. This is an opportunity to right this wrong. This is not about us and it is not a niche issue: it is about civil liberties, decency, honesty, openness and transparency. We need action from Ministers on this.