Sanctions and Anti-Money Laundering Bill [HL]

Lord Flight Excerpts

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

I look forward to listening to noble colleagues as to whether my views are those of just one, maybe maverick, Lord, but one who knows the overseas territories in depth. Then I shall listen to the response of my noble friend on the Front Bench. I beg to move.

[Lord Flight (Con)]

My Lords, I want to speak out against Amendment 22 and in favour of Amendment 22A. I also declare my own interests as in the register: I am a regulator in the island of Guernsey.

As the Minister argued well, Amendment 22 raises major constitutional issues which the noble Lord, Lord Naseby, has described in even greater detail, but it is also the wrong approach to addressing the very problem of money laundering. It is shameful that the UK has a far worse record than the overseas territories. The reforms in the UK do not work because they do not include any non-British company and have no verification, whereas the arrangements that both the Crown dependencies and overseas territories have put in place provide all the necessary information to the appropriate authorities on asking. It is also a much more tightly and accurately kept register.

The legislation invites the overseas territories to discuss the constitutional position with government; it may be suitable to go for judicial review. I am sure that some will feel that the UK Government are trying to push them in the direction of a UDI. The UK Government’s position was set out extremely well back in 2015, at the beginning of debates on this territory, by the noble Baroness, Lady Neville-Rolfe, when she was Under-Secretary of State at the Department for Business. She said:

“The noble Lords, Lord Watson, Lord Mitchell and others, asked why we are not including the overseas territories and Crown dependencies in this legislation. The Prime Minister made clear that he would like a publicly accessible central registry of company beneficial ownership information to be the new international standard. We would therefore like the overseas territories and Crown dependencies to match our policy. We respect, however, the fact that the overseas territories and Crown dependencies are separate jurisdictions with their own elected Governments, under which they are responsible for fiscal matters”.—[Official Report, 19/1/15; col. GC 321.]


That was the British Government setting out our position quite straightforwardly, but they are now standing on their head and, as commented, putting the overseas territories out to dry.

The UK treats overseas territories and Crown dependencies alike, so it is rather strange that there is one arrangement for one category and one for another. Amendment 22 empowers the United Kingdom Government to impose publicly accessible registers on overseas territories but not on Crown dependencies. If any overseas territory has not met the timetable by the end of December 2020 as advised, the Secretary of State is apparently mandated to draft Orders in Council requiring them so to do. I hope that, as time passes, if this legislation goes ahead, ways will be found to implement it in a more balanced manner and, potentially, for it to be amended at some future stage.

In the other place, Sir Alan Duncan repeated the point about overseas territories being,

“separate jurisdictions, with their own democratically elected Governments”.

He went on:

“They are responsible for their own fiscal matters, and they are not represented in this Parliament”,—[Official Report, Commons, 1/5/18; col. 181.]


which does not legislate for them. A deal was done 30 or 40 years ago in which, in essence, the British Government said, “We’re not going to support you financially. You’ve got to develop your own economy but we won’t interfere with your doing that”. However, they now represent a serious threat, as my noble friend Lord Naseby pointed out, to these jurisdictions.

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[Lord Anderson of Swansea]

My Lords, the use by Russia of dirty money was highlighted in the report today of the Foreign Affairs Committee in respect of counterterrorism and so on. It is clear that although the two Members who have just spoken did so with great passion and knowledge, they failed to take on board the actual figures. Global Witness says that at the moment there is £34 billion of Russian money in the overseas territories, £30 billion of which is in the BVI. Why does the Russian money go there? Is it suggested that all that money is clean? Noble Lords will recall that when the noble Lord, Lord Faulks, and I among others were pointing out areas of property investment in London, we said there are several streets in the Royal Borough of Kensington and Chelsea, which we both know well, where the lights never go on at night because money—

[Lord Flight]

My Lords, does the noble Lord, Lord Anderson, have the figure for black Russian assets in the UK? I imagine that there is substantially more than £30 billion.

[Lord Anderson of Swansea]

My Lords, with the public register of beneficial ownership it should be possible to obtain those figures. It would be absurd if money that fled from the London property market went to the overseas territories and sought a haven there. Anyway, the figures that are given—I am very happy be told that the they are incorrect—are that £34 billion of Russian money is currently in the overseas territories, £30 billion of which is in the BVI, and there has been over £100 billion over the past decade. Surely a proportion of that at the very least is dirty money, and the question must therefore be posed: are we prepared to countenance dirty money finding a haven in the overseas territories? That is what is suggested.

We have to respond very sensitively. Of course there will be an economic impact, and that will only be exacerbated by the impact of the hurricane, particularly in the BVI. Because of the UK’s responsibility to these overseas territories, we will have to bear at least part of the cost, but surely we should not countenance the position that I have mentioned. If the Minister has figures other than this £34 billion, I am very happy to hear them, and if he suggests that none of that is dirty money then I will be happy to hear his view, but surely it is in everyone’s interest that dirty money be pursued wherever it is and that there be a publicly accessible register.

At the same time, the economic impact should be recognised, along with the possible damage to the constitutional position. If those countries wish to go independent, so be it. Fairly recently there was a report on the contingent liabilities to the British taxpayer of the overseas territories. I wonder where the balance would lie, if a number of these countries went independent, regarding the amount currently spent by the British taxpayer. I am happy with that, but the question must remain: if these figures are correct, and if it must be that a portion of that sum is dirty, are we prepared to allow that to continue?

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[Lord Neuberger of Abbotsbury (CB)]

My Lords, I strongly support the amendment of the noble Lord, Lord Naseby. The clause which he seeks to remove from the Bill is a classic example of a proposal which may seem right to many people—for the reasons given so clearly by the noble Lord, Lord Anderson of Swansea—but, after proper consideration can be seen to be very wrong.

Unlike most countries, our constitutional arrangements are based on conventions and mutual respect rather than pieces of paper, and we break those conventions and trample on that mutual respect at our peril. As the 2012 White Paper on the territories recognised, the UK’s legislative power over the territories is in practice and by convention limited to,

“external affairs, defence, internal security (including the police) and the appointment, discipline and removal of public officers”—

and, I would add, compliance with the UK’s international obligations. Accordingly, the proposal would run contrary to the established distribution of powers—quite apart from the points made about the constitution of some of the territories.

Not only that, it would do so in a most inappropriate way. There has been no consultation with the democratically elected Governments of any of the territories about the legislation. There has been no investigation of the effectiveness of this law in relation to any of the territories. There has been no inquiry as to the economic and social consequences of the legislation on any of the territories. That is in circumstances where, to go back to what the White Paper said, the UK Government aim,

“to work with Territories to strengthen good governance arrangements, public financial management and economic planning”,

to work with the territories.

I regret to say that the proposed law appears to be old-style colonialism at its worst: damaging legislation which has no cost for the legislating country but which will cause hardship to the victim countries, and does so not merely without representation but without consultation or full investigation. But it gets worse. The law is imposed in circumstances in which it is indisputable that the BVI, Cayman and Bermuda comply with all current international transparency and taxation requirements, such as those laid down by the OECD. This was recognised by the very full and generally rather critical December 2017 EU Muscovici report, which identifies which countries are unco-operative by hiding assets, and so on, and it does not include any of the territories.

[Lord Flight]

Is it not the case that they also comply with all the FATF requirements, which the UK does not?

[Lord Neuberger of Abbotsbury]

I believe that is the case, yes. I was going on to say that in many respects it appears that all three territories which I mentioned have a regulatory regime which in many respects is stricter than that of this country.

On top of all this, this proposal imposes a financially damaging regime on at least three territories in the Caribbean area with significant financial service industries for which the UK has responsibility, while not doing so for the Crown dependencies with substantial financial service industries closer to home: Jersey, Guernsey and the Isle of Man, for example. That adds discriminatory insult to unconstitutional and unfair injury. Let me make it clear to the Crown dependencies that I say this to oppose the proposed law applying to the territories, not to support it applying to the dependencies.

Finally, what will happen if this unfair and unjustified law is brought into force, apart from leading to a real sense of grievance and of being let down on the part of small states which it is our duty to protect? It will do no good. If there is the hot money to which the noble Lord, Lord Anderson of Swansea, referred, it will quickly move away from the BVI, Cayman and Bermuda to places which do not have respected democratic Governments and independent and respected courts, where the Judicial Committee of the Privy Council, which I had the honour to chair for five years, has no power. In effect, it will not be upholding the rule of law, it will be undermining it.

It will be only when we have universal acceptance of such regulation that, I respectfully suggest, it will be appropriate to impose it on these territories.