Sanctions and Anti-Money Laundering Bill [HL]

Earl of Kinnoull Excerpts

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

[The Earl of Kinnoull (CB)]

My Lords, it is always a pleasure to follow the noble Baroness. I am grateful to her for having responded with such grace and clarity to a point I made six months ago in a similar debate. I should begin by declaring my interests and saying that I am in the curious position of deeply respecting the people who have signed the amendment, and usually agreeing with everything they say, but of disagreeing with what they say tonight. I will explain why.

If we in this Chamber sought to legislate for Scotland in a matter of devolved competence, and we did so without the consent of the Scottish Parliament, we can imagine what a hell of a hullaballoo would be raised immediately. We would be reading about it in every newspaper and the media would be full of it. Indeed, the media are fairly full of warnings from the Scottish Government every day that we must not do that. As a resident of Scotland—not so far from Glen Clova, in fact—I can tell the House that there are deep feelings in Scotland about someone coming into our competence. I know that that will be the same in Wales. I was with the EU Select Committee when we visited the Welsh Parliament, and in the course of a day that point was made to me probably half a dozen times by different Welsh politicians, from every different denomination and party within Wales.

Indeed, as a Parliament we developed the Sewel convention to cope with this situation, and it has been put into the memorandum of understanding. The October 2013 version says that,

“the UK Government will proceed in accordance with the convention that the UK Parliament would not normally legislate with regard to devolved matters except with the agreement of the devolved legislature”.

Indeed, we put that into statute—certainly in the Scotland Act 2016, and I think in the equivalent Wales and Northern Ireland legislation. It has, of course, been litigated.

I have here the Miller judgment, and in his outstanding judgment—from which I shall quote shortly—the noble and learned Lord, Lord Neuberger, rather elegantly reminds us, in paragraph 144, that the Sewel convention was not invented at that time, but that its substance was actually in effect between the UK and Southern Rhodesia, because the leading case in the Privy Council from 1969 discussed that. The Sewel convention represents something that this Parliament has had for a long time, and it stretches out to our Commonwealth as well as to our devolved Administrations here.

In the final paragraph of the five pages considering the convention, the noble and learned Lord says:

“In reaching this conclusion we do not underestimate the importance of constitutional conventions, some of which play a fundamental role in the operation of our constitution. The Sewel convention has an important role in facilitating harmonious relationships between the UK Parliament and the devolved legislatures”.


I repeat all that, and make a meal of it, because I have to say that the countries concerned and named in the amendment—I use the word “countries”, having lived in Bermuda for a number of years—are very proud and sophisticated places. Bermuda is incredibly sophisticated: its GDP per head is much bigger than that of the UK; its reinsurance industry overtook the UK’s in size in 2004, and is much bigger and very sophisticated. It would hate any infection of the sort of corrupt and criminal behaviour that has been elegantly referred to by the noble Baroness, Lady Stern. Everyone working on Bermuda feels—as I and every Member of this House does—that chasing down these corrupt and criminal individuals and their money is very important.

Therefore, we should not legislate without at least consulting these Parliaments, and getting their agreement to do so. It would be deeply wrong and very counter- productive not to do that. If one were to think of legislating, one should do so under the Sewel convention if there is strong evidence that something very bad is going on, and there is no ability to address that. However, I have to say that the evidence is the other way. I looked again at the Wikipedia article on the Panama papers. About half way down that article, there is a rather good league table of the banks that had been involved in that affair. Four of the top 10 banks listed in the league table were based in Luxembourg. None of the top 10 banks was based in any of the countries listed in this amendment. Therefore, we are getting slightly ahead of ourselves. Certainly, there appears to be a bit of work to do at home in the EU before it starts trying to do a lot of work outside.

When responding on the then Criminal Finances Bill, the noble Baroness, Lady Williams—I am sorry not to be able to read out the relevant bits—said that the Government and the overseas territories discussed these issues round the table almost as if they were members of a family, and that there were a lot of subtle ways in which the British Government could try to make sure that there was continual progress on this very important issue. She assured the House that such measures produced continual progress. In my experience, I think they do as well. The thinking behind this amendment is admirable. I hate all this disgusting stuff perpetrated by corrupt and criminal people as much as anyone, but I do not think that the amendment pushes the ball further up the pitch. It would be very damaging constitutionally to our relationships with our loyal overseas territories. We should continue to take the road we have taken so far, which is to push the ball gradually up the pitch, as and when our Government meet representatives of our overseas territories and discuss issues such as that which came out of the EU yesterday.

[Lord Naseby]

My Lords, I declare an interest as vice-chairman of the All-Party Parliamentary Group for the Cayman Islands. In addition, a member of my family lives in the Cayman Islands. I very much support what the noble Earl, Lord Kinnoull, has just said.

We have come a long way in the best part of 18 months from a situation in which there was no statutory methodology whereby United Kingdom law enforcement agencies could get information from any of the overseas territories in a reasonable length of time and know that it had been properly produced. Speaking only from my knowledge of the Cayman Islands, that information is now available 24 hours a day, 365 days a year. That is rather better than Her Majesty’s Companies House is capable of doing. I think that is a great advance.

I deeply regret what the noble Baroness, Lady Kramer, said: namely, that when Cayman Islands representatives went over to Brussels recently, they were protected by Her Majesty’s Government. They went on their own, put their material before the authorities there, and, quite rightly, the authorities listened properly and recognised the progress that had been made. That is why the Cayman Islands are not on the blacklist. Of course, the volume of financial operations in Bermuda and the Cayman Islands is extensive—so, understandably, anybody who is concerned about financial transactions will keep a watch on what is happening. That is absolutely right and justified.

The noble Earl, Lord Kinnoull, rightly referred to Luxembourg. Top four—not the bottom four. What about other parts of the world? The USA is probably in the clear, as I am sure that the central government of the USA is in the clear. However, it is totally incapable of controlling Delaware, Nevada and half a dozen other states. We are supposed to have a special relationship with the United States. That is not much good if we accept an amendment such as this and find that all the people in our overseas territories are thrown out of business as their legitimate business is undercut totally by Delaware and Nevada—particularly Delaware.

Therefore, I say to your Lordships, “Tread carefully. Recognise that huge progress has been made in the last 18 months and that we now have a situation where our authorities can get concrete evidence when it is required”. We are not getting that out of the present system of control in the United Kingdom. We can go out of this Chamber tonight, go through the smart parts of central London and see how many of those houses are unlit. Do none of us wonder who owns those houses? Do we think the British own them? We all know in our heart of hearts that they are not owned by British people, and almost certainly not by continentals. That money has come from somewhere. It seems to me pretty likely that it is hot money. So I ask noble Lords to think long and hard before they start to destroy these overseas territories.

I was sorry that the noble Baroness who introduced this amendment brought in human rights. I have had the privilege of working and living in Pakistan, India and Sri Lanka and I know that part of the world extremely well. Legitimate British companies working there are not exploiting people. They have brought employment there, better living conditions and all the rest. The noble Baroness is quite wrong to suggest that every company operating there—or the vast majority—is exploiting these poorer countries. I ask the noble Baroness and others to find some real, concrete examples rather than generic ones. That is why I will resist the idea of a public register until such time as we have given the existing one time to work, and until such time as the EU and the United Kingdom persuade the United States to join in with producing uniform reporting. I say to my noble friend on the Front Bench that I hope Her Majesty’s Government will tread carefully and recognise the work that has been achieved so far in a pretty short measure of time.

--- Later in debate ---

I hope the Minister will be able to give a concrete progress report. He had to dash away from the last Committee session to meet members of the overseas territories on the joint ministerial committee. Let us hear his assessment. But I give notice from the Opposition—and I know this has cross-party support—that we will be returning to this matter and we will push it strongly, because everyone wants to see firm action and we do not want to wait another seven years.

[The Earl of Kinnoull]

Before the noble Lord sits down, could he give some comment on the Sewel convention-type points that I made? I was making a constitutional point and it would be very helpful to understand the Opposition’s view.

[Lord Collins of Highbury]

The Opposition’s view, in terms of global economic theft, for want of a better word—the noble Baroness, Lady Kramer, raised this point—is that we are not talking about domestic industries or domestic activities. We are talking about transactions that are going global in terms of what I would call international crime. Not only the Panama papers but also the Paradise papers are showing that these activities are causing far more damage.

I believe that the overseas territories have an obligation to comply with international agreements, certainly regarding our UN obligations on sanctions. If we sanction a country for corrupt activities, the overseas territories have to comply. If it is good enough for sanctions, it is important that we consider it important enough for some of the crimes we have heard described this afternoon.

Data Protection Bill [HL]

Earl of Kinnoull Excerpts

3rd reading (Hansard): House of Lords & Report: 2nd sitting (Hansard): House of Lords
Wednesday 17th January 2018 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I strongly support this excellent group of amendments. I declare my interests as set out in the register, particularly those in respect of the insurance industry. I am enormously grateful to the Minister for being so generous with his time in the process that has led to the birth of these amendments. His Bill team has been quite outstanding—I see some of them sitting over there—and I thank them as well. I also thank three other Members of your Lordships’ House: the noble Lord, Lord Clement-Jones —who yet again was emailing me at 11 o’clock last night —and the noble Lords, Lord Hunt of Wirral and Lord Stevenson of Balmacara, who have been great supporters in trying to make sure that the ordinary man in the street can continue to buy insurance at a good price.

I have one tiny point of clarification, which will be very easy for the Minister to answer. He talked about insurance and I have talked about insurance, but it is important that reinsurance is understood, as well as retrocession and all the other words. We are talking about the whole concept of insurance and if he could confirm that reinsurance, retrocession and other things are included, that would be very helpful.

Anyway, with this change the man in the street will be able to buy personal and business insurances that involve special category personal data and yet the GDPR will have arrived. Insurers will have to improve their game somewhat—never a problem for the good, and important for the back-markers in the industry.

[Lord Clement-Jones]

My Lords, I congratulate the noble Earl on the assiduous way in which he has pursued these issues on behalf of the insurance industry, and thank the Minister for his close engagement on them. We very much welcome these amendments but I have a couple of clarificatory questions for the Minister, the answers to which would be helpful in making sure that we all understand the exact position of the insurance industry relative to these new provisions.

The proposed derogation to paragraph 13A of Part 2 of Schedule 1 does not specifically address the processing of data relating to criminal convictions or offences. First, can the Minister confirm that paragraph 28 of Part 3 of Schedule 1 may be read in conjunction with paragraph 13A of Part 2 to permit the processing of data relating to criminal convictions or offences where it is necessary for an insurer to process this data for policy underwriting and claims management or related money laundering and anti-fraud activities? The reference in paragraph 13A to,

“racial or ethnic origin, religious or philosophical beliefs or trade union membership, genetic data or data concerning health”,

would appear to preclude this, but we assume that this is not the intent.

Secondly, can the Minister confirm that the processing of special category data or data relating to criminal convictions or offences by insurance companies and related intermediaries, such as reinsurers and brokers, for the purposes of conducting insurance-related business and managing claims will be regarded by the Government as purposes that are in the “substantial public interest”?

Sanctions and Anti-Money Laundering Bill [HL]

Earl of Kinnoull Excerpts

Ping Pong (Hansard): House of Lords
Monday 21st May 2018 Lords Chamber

[Lord Faulks]

My Lords, I think that the noble and learned Baroness is quite right with her mote and beam analogy. We must think about London, as my noble friend Lord Naseby, said. In 2016, David Cameron announced his intention in respect of anti-corruption and a register of beneficial interests. Since then we have had the Criminal Finances Act 2017 and this Bill. In both of those, my noble friend Lord Hodgson and I were keen to ensure that the Government did their best to stem the flood of dirty money, particularly into property money in London, by setting up a register of beneficial ownership which, when combined with unexplained wealth orders, might really do something to prevent what is a real obscenity about London property at the moment. So much money is flooding into the market yet so few people who start their work in London can afford to live. That is the mote that we have in London.

I wanted to press the matter to a vote, because our intention was to hurry this up, but I was met with formidable opposition from the Government, explaining how difficult the whole thing was. Finally, just before a vote might otherwise have taken place, I was reassured that there was much activity in this regard and there would be regular updates and a ministerial Statement. Sadly, the earliest the register would be legislation-ready was 2021—so five years after David Cameron’s summit. Here we have an amendment put down in the Commons after very little of the preliminaries, as has been quite rightly pointed out, with no consultation and nothing of the sort that one would expect with such a radical procedure. It states:

“The Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council”.


It is a “must”, not a “may”. The only part of this amendment which is, perhaps, acceptable, is the very first part, describing the reasonable assistance to be given to the Governments of the British Overseas Territories. However, I apprehend that that is being—and has been—given for some considerable time. I disagree with my noble friend Lord Naseby on only one point: the Minister, not only today but in responding to the amendment so eloquently moved by the noble Baroness, Lady Stern, on Report, vigorously defended the position of the Government and of the British Overseas Territories in their attempt to comply with the natural desire that we all have to stamp out corruption.

This amendment goes on to require an Order in Council to be laid before Parliament, but then provides that it ceases to have effect,

“if not approved by a resolution of each House of Parliament before the end of 28 days”.

I wonder if a resolution of that sort would meet with the approval of both Houses of Parliament, having regard to the hasty way in which this amendment was introduced and to the real difficulties that it will cause to our friends in the British Overseas Territories.

This amendment is ill thought out, no doubt born out of an entirely proper desire to stem the flood of corruption. However, in so doing it damages our relationship with the British Overseas Territories at a time when we need all the friends we can get outside this country. The amendment asks them to do what is required in a timeframe which is much shorter than that for this country: the mote and beam analogy is entirely appropriate.

[The Earl of Kinnoull (CB)]

My Lords, I declare my interests as set out in the register of the House, particularly those in respect of financial services. I support Amendment 22A, in the name of the noble Lord, Lord Naseby. How well we know what a stramash would result if Westminster sought to legislate for Scotland, in a matter of devolved competence, without even consulting the Scottish Parliament. Parliament developed the Sewel convention to cope with this very situation. We have heard, in a very powerful speech, from the noble and learned Lord, Lord Neuberger, and others just how this convention now expressly extends to our overseas territories.

The overseas territories are proud and sophisticated countries and deserve our respect. Constitutionally, our respect includes conventions. Money laundering is, rightly, a devolved matter for them. Bermuda, the Cayman Islands and the British Virgin Islands are large and sophisticated financial centres with well-respected regulators. Accordingly, to legislate without even consulting these Parliaments is conventionally wrong. This is why I feel that the Sewel convention should apply. Westminster has the power to intervene and should exercise this only when things are badly awry. However, evidence of “awryness” is, in fact, the other way.

As other noble Lords have mentioned, Pierre Moscovici delivered a report last year, and this was adopted by the European Council on 5 December. On page 5 of that 35-page report, the Council affirms that,

“these actions collectively taken by EU Member States are in line with the agenda promoted by the G20, the OECD and other international fora”.

None of the overseas territories is on the blacklist.

Annexe 2 of the adopted conclusions, which was updated twice in March this year, lists countries in various categories that have agreed to make changes by the end of this year; it is a large list. In other words, provided that changes are made by those countries, in the EU Council’s view they will be fully compliant with EU, G20 and OECD thinking in this area. Only four of the 14 overseas territories feature on the list of co-operative countries. The other 10 do not; in other words, they are absolutely clean in the eyes of Pierre Moscovici and his very substantial and hard-working staff. In that respect, the 10 that are clean are doing rather better than Switzerland or Hong Kong, which both appear on the list. Indeed, 29 countries are making changes to improve transparency; none of the overseas territories is listed. Twenty-seven countries are making changes to anti-BEPs measures, which are sophisticated corporate tax dodges; none of the overseas territories is listed. Twenty-eight countries, including Switzerland and Hong Kong, are making changes to amend or abolish harmful tax regimes. None of the overseas territories is listed. Nine countries, including Bermuda, Anguilla, the BVI and the Cayman Islands, have agreed to,

“address concerns relating to economic substance”.

Among those nine countries are Guernsey, Jersey and the Isle of Man, the only time their names appear in the annexe at all. Those three islands do not appear in the Commons amendment and, as other noble Lords have observed, I cannot believe that is fair.