Sanctions and Anti-Money Laundering Bill [HL]

Lord James of Blackheath Excerpts

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

[Lord James of Blackheath (Con)]

My Lords, my contribution to these proceedings will be to present my memories of two money-laundering activities that took place and see how they compare with what might happen today if they had to contend with the presence of this enacted Bill.

The first case emanates from the northern shores of Africa and the other one relates to our old friends the IRA. They are very different, and I shall take the Libyan incident first, which is astonishing in its own way. President Gaddafi had decided that he had to get rid of this terrible capitalist symbol known as Coca-Cola. Coca-Cola had to be driven from the shores of Libya, but he did not have another drink to replace it, and Libya is a very hot country and you have to have a drink.

He approached a company in Yorkshire which specialises in turnkey operations and said, “Please invent me a cola company”. Unfortunately, and unbeknown to them at that time, I was about to be made chairman of this company because the bankers were frightened about how much its borrowings were rising. I arrived on the day when the cola had apparently been created to replace Coca-Cola. Coca-Cola had been sent from the shores of Tripoli with the blasts of cannons echoing in their ears—he got planes to shoot at the ship as it went out to sea, carrying all the residual Coca-Cola of Libya—and the new cola was born.

Unfortunately, the headline in the national press the next morning, on the launch of this new cola—I am awfully sorry but I am going to use a very non-parliamentary word; apologies to Hansard and to the Chair—was, “Kitty Kola is Kitty Cat Piss”. I thought, “This is terrible—if this is what Mr Gaddafi thinks, he will never pay the invoice”. So I said, “How are we going to get paid for it? How much do they owe us?”. They said, “£27 million, sir”. I had only been there since Monday and this was the Tuesday. I said, “We’re not going to get paid, are we?”. They said, “Yes, we will—you wait and see”.

Later that day, they came to me and said, “We’ve been paid”. I said, “Let me see”, and they showed me a credit transfer for £29 million. I said, “That’s £2 million too much”. They said, “Yes”. I said, “Send it back immediately and just keep the £27 million”. “Don’t be a fool”, they said, “You’re a new chairman and you don’t know what’s going on”. I said, “I certainly don’t. What’s the £2 million for?”. They said, “You’ll be told later today”. I said, “I can hardly wait.”

Shortly after that, I got a communication from Libya saying, “Please take the £2 million and open a bank account for us in Rome, and provide us with all the bank details—and by the way, we’ve sent you a picture of the passport of the individual whose name we need to have on the account”. I said, “We’re not doing this, are we?”. They said, “If you don’t do it, we’ll never get another deal in Libya”. I said, “Have you done this before?”. They said, “Yes”. I said, “How many times?”. They said, “Seven times”. I said, “You’ve opened seven bank accounts? For how much?”. “Well, it’s usually about £2 million each time”. “And what’s that money being used for?”. They said, “We don’t know—it’s none of our business”. I said, “It jolly well is. We’re going to have to talk to the security staff about this, straight away”. They said, “You can’t—they’ll blow us away”.

So I got on to the security people and said, “Are you interested in this?”. They said, “Yes. Come and have breakfast and bring all the stuff with you”. So the next morning—they always do it nicely—I got breakfast at the Dorchester, which is never to be complained about, and I took all the files on this thing. They said, “This is wonderful! This is like gold dust.” I said, “I think it’s terrible”. “No, no, no—don’t stop doing it; just give us all the details and then we’ll have the whole thing completely under supervision”. I said, “This is going to be used for buying armaments to murder the Pope and everything else”. “We’ll look after that; you just do what they’re telling you, give us the details and we’ll all be happy”.

The present Bill makes everything that I have just told noble Lords very illegal. But I ask the Minister: how are we going to catch it, because I cannot see that there is any regulatory process or overview that will stop it happening again? And do we think it is not happening today? The company that I was chairman of for that brief period is not there today—but somebody is and they will be doing the same. How are you going to make this Bill work to stop that happening again? I bet it is happening today, and will happen tomorrow and the next day. I would not like to know how many private bank accounts are opened up which provide easy access for Islamic terrorist intervention across the shores of the southern Mediterranean.

I have a conundrum for your Lordships. I will mention five different types of company and I want noble Lords to tell me if they can see instantly why it was attractive to the IRA to acquire a controlling interest in five small listed companies trading individually on the London Stock Exchange. They were as follows: one, the world’s biggest library of photographs available for press utilisation; two, a spoil reclamation company, taking salvage spoil from mining tips; three, the building of a residential village on the shores of Portugal; four, a technical film services company; and five, an extremely upmarket and very posh limousine service working round the airports of Europe. What was the possible interest in having those five companies? I have asked around and only one Member of the Lords got the answer: my noble friend Lord Holmes of Richmond—it took him about seven seconds. I think that he should be put in charge of intellectual investigations of all suspicious work immediately.

The answer, quite clearly, is that every one of them performs a service abroad for which an invoice for payment can be provided from Ireland. It is an easy way of transferring money wherever you want it, in small or big sums, and having the money—criminally acquired funds by the IRA in Ireland—filtered away into little bits and pieces. The village in Portugal is funny, I think, because it was intended to be the holiday venue and retirement homes for retired successful IRA operatives. I did not know that it had such care for the welfare of its people. It makes one feel proud to know that the IRA was so responsible.

The film technical services company was the one that caused the greatest problem. There was in those days—this is the terribly important difference from what we have now—a hugely active corporate governance department in the Bank of England. It was run by a man called Jonathan Charkham who, among his many other great distinctions, was the father of my noble friend Lady Shackleton of Belgravia. Jonathan Charkham was the witchfinder general for the IRA’s activities in the 1980s and he was brilliant at it. He sadly died some years ago. The department in the Bank of England had ferreted away and had found a very strange set of circumstances. An American company that it could not identify had worked through Savory Milne, the broking arm of the Swiss Bank Corporation, to acquire the controlling interest of a company called Eagle Trust and had then used Eagle Trust to float a rights issue to acquire a tiny little film services company called the Samuelson Group for £55 million. The Bank of England decided that something was really wrong because the £55 million, which had been used for the rights issue, was stolen completely. The IRA took that as its up-front money.

Again, I was put in to sort this one out. Jonathan Charkham went in one day and called the board. He had the right—as the backbone of the Bank of England—to call a board meeting which he could attend, sitting beside the chairman of any public company. He sat with this lot, went through the whole thing and then fired the whole board on one day. He then put me in as chairman and I had the night to get together a new board for the next day. We looked at this and it was just a nightmare. Eventually, we found that money had indeed been stolen and, later on that same day, there arrived some very strange Americans from a company in New York who announced that they were the new owners of Eagle Trust. The IRA had been in collusion with Cosa Nostra—I do not how this Bill would cope with that if we get it again. The IRA was using foreign money to buy up a company that it wanted to steal some money from. I am not sure that this Bill gets anywhere near providing a regulatory network to get into that. The difference as I see it between then and now—I know I am talking about 25 or 30 years—is that, whereas then we had the regulatory people and professionals who could act on and work with this sort of thing, nowadays we rely upon the FCA and conventional police forces; the security arm will only act if there is a specific security leak recognised with it. We do not have anything like the old Bank of England corporate governance arm which did so much wonderful work to watch what was happening and move on it. Without that, I cannot see how the Bill will have teeth.

A funny thing about the acquisition of the Samuelson Group was that when we went through the accounts, we found that the IRA had ticked off items and had written down, “Four funerals, £500,000”. We wondered what the IRA wanted with four funerals for £500,000. It turned out that this was code for the film “Four Weddings and A Funeral”, which it had spent all the money producing. The IRA had worked for a year for no fees, which had caused it to go bust, in return for 65% of the revenue from the film, which was an enormous amount of money—so we turn from a £4 million a year loss to £14 million a year profit. The flotation raised nearly half a billion pounds and all the banks were paid back with all the money from that. The IRA lost the lot—which I have to say is one of the most satisfactory things I could ever record.

As I say, I cannot see that the Bill will have teeth. There are no foot soldiers to back it up, and we need them. If the Bill is to work, we need to get the Bank of England to decide whether it will reactivate corporate governance as one of its arms. Are we going to make the FCA do its proper job for once and get on with supervising these things, or will it be the security services more generally? At the moment, it is not there and it will not happen—and unless we get it, this well-meaning Bill will not work. It did work before—we cleared the decks and we do not want them to get cluttered with these dreadful people again. We need to make something to back this Bill.

Shipping: International Maritime Law

Lord James of Blackheath Excerpts

Monday 4th February 2013 Lords Chamber

Asked By

[Lord James of Blackheath]

To ask Her Majesty’s Government whether they will issue any guidance to ex-Navy personnel or independent commercial organisations offering security and escort convoy services to shipping off the coast of Somalia regarding their rules of engagement and their compliance with international maritime law.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)]

My Lords, the Department for Transport issued interim guidance on the use of private maritime security companies in December 2011. This was updated in June 2012 and is periodically reviewed to ensure its relevance. The Government are working with industry to establish a national accreditation system for this industry; both stress the importance of compliance with international maritime law, including the principle of self-defence, which provides the only condition under which these privately contracted civilian guards may use force.

[Lord James of Blackheath]

My Lords, I thank the Minister for that response, but I am a little disappointed not to hear that it is possible for us to ban altogether this independent commercial activity. It is seriously prejudicial to the interests of, perhaps, formerly redundant members of our services who find deliverance from their predicament by joining, given the extreme hazard that they will represent under international law, both to themselves and to this country’s reputation.

[Baroness Warsi]

My Lords, there are, of course, many members of the Armed Forces who take part in private security companies, including private maritime security companies: 90% of private maritime security companies are based in London. We have led the international community in providing the guidance and rules under which such companies can operate. My noble friend will be aware that these companies operated long before we issued the guidance; clearly, they now operate within a system for which there is guidance.

Syria

Lord James of Blackheath Excerpts

Thursday 8th November 2012 Lords Chamber

Asked by

[Lord James of Blackheath]

To ask Her Majesty’s Government whether they have received any information regarding the origin of weapons of mass destruction currently claimed by the government of Syria to be held by that country.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)]

My Lords, we are very concerned about Syria’s chemical and biological weapons, the existence of which the Syrian foreign ministry spokesperson confirmed on 23 July 2012. The spokesperson also threatened to use such weapons against external aggressors. There has been significant public speculation about the origins of Syria’s chemical and biological weapons, but I am unable to comment on the accuracy of this information.

[Lord James of Blackheath]

My Lords, I thank the Minister for that response, but I wonder whether there is any case for pursuing this in greater detail. If it could be proven that these had originated in Iraq, would the original United Nations resolutions cross the border with the weapons of mass destruction? Secondly, now that we have the Syrian Government admitting widely to the use of drones that have been taken from Iraq, this would put every centre of government in Europe within a 4-metre radius of a payload of up to 10 kilograms of nerve gas.

[Baroness Warsi]

The noble Lord is quite right to raise these concerns. Although there have been numerous newspaper articles and think tank reports, including those from the Center for Strategic and International Studies, referring to anecdotal reports about the origins of these weapons of mass destruction, we are not aware of any firm and credible evidence to support this suggestion. In any event, UN sanctions on Iraq would not apply to Syria; we do, however, share concerns that Syria has conventional weapons on which chemical weapons could be used.

EU: Recent Developments

Lord James of Blackheath Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord James of Blackheath]

My Lords, I hope the minute that that has taken has not come off my time. I do not wish noble Lords to get too encouraged when I start with my conclusions but I will not sit down when I have made them. I will then give the evidence to support them and, I hope, present the reasons why I want support for an official inquiry into the mischief I shall unfold this afternoon. I have been engaged in pursuit of this issue for nearly two years and I am no further forward in getting to the truth.

There are three possible conclusions which may come from it. First, there may have been a massive piece of money-laundering committed by a major Government who should know better. Effectively, it undermined the integrity of a British bank, the Royal Bank of Scotland, in doing so. The second possibility is that a major American department has an agency which has gone rogue on it because it has been wound up and has created a structure out of which it is seeking to get at least €50 billion as a pay-off. The third possibility is that this is an extraordinarily elaborate fraud, which has not been carried out, but which has been prepared to provide a threat to one Government or more if they do not make a pay-off. These three possibilities need an urgent review.

In April and May 2009, the situation started with the alleged transfer of $5 trillion to HSBC in the United Kingdom. Seven days later, another $5 trillion came to HSBC and three weeks later another $5 trillion. A total of $15 trillion is alleged to have been passed into the hands of HSBC for onward transit to the Royal Bank of Scotland. We need to look to where this came from and the history of this money. I have been trying to sort out the sequence by which this money has been created and where it has come from for a long time.

It starts off apparently as the property of Yohannes Riyadi, who has some claims to be considered the richest man in the world. He would be if all the money that was owed to him was paid but I have seen some accounts of his showing that he owns $36 trillion in a bank. It is a ridiculous sum of money. However, $36 trillion would be consistent with the dynasty from which he comes and the fact that it had been effectively the emperors of Indo-China in times gone by. A lot of that money has been taken away from him, with his consent, by the American Treasury over the years for the specific purpose of helping to support the dollar.

Mr Riyadi has sent me a remarkable document dated February 2006 in which the American Government have called him to a meeting with the Federal Reserve Bank of New York, which is neither the Federal Reserve nor a bank. It is a bit like “Celebrity Big Brother”. It has three names to describe it and none of them is true. This astonishing document purports to have been a meeting, which was witnessed by Mr Alan Greenspan, who signed for the Federal Reserve Bank of New York of which he was chairman, as well as chairman of the real Federal Reserve in Washington. It is signed by Mr Timothy Geithner as a witness on behalf of the International Monetary Fund. The IMF sent two witnesses, the other being Mr Yusuke Horiguchi. These gentlemen have signed as witnesses to the effect that this deal is a proper deal. There are a lot of other signatures on the document. I do not have a photocopy; I have an original version of the contract.

Under the contract, the American Treasury has apparently got the Federal Reserve Bank of New York to offer to buy out the bonds issued to Mr Riyadi to replace the cash which has been taken from him over the previous 10 years. It is giving him $500 million as a cash payment to buy out worthless bonds. That is all in the agreement and it is very remarkable. Establishing whether I have a correct piece of paper is just two phone calls away—one to Mr Geithner and one to Mr Greenspan, both of whom still prosper and live. They could easily confirm whether they signed it. Mr Riyadi, by passing these bonds over, has also put at the disposal of the US Treasury the entire asset backing which he was alleged to have for the $15 trillion. I have a letter from the Bank of Indonesia which says that the whole thing was a pack of lies. He did not have the 750,000 tonnes of gold which was supposed to be backing it; he had only 700 tonnes. This is a piece of complete fabrication.

Finally, I have a letter from Mr Riyadi himself, who tells me that he was put up to do this, that none of it is true, and that he has been robbed of all his money. I am quite prepared to recognise that one of the possibilities is that Mr Riyadi is himself putting this together as a forgery in order to try to win some recovery. But it gets more complicated than that because each of the $5 trillion payments that came in has been acknowledged and receipted by senior executives at HSBC and again receipted by senior executives at the Royal Bank of Scotland. I have a set of receipts for all of this money. Why would any bank want to file $5 trillion-worth—$15 trillion in total—of receipts if the money did not exist? The money was first said to have come from the Riyadi account to the Federal Reserve Bank of New York and from there it was passed to JP MorganChase in New York for onward transit to London. The means of sending it was a SWIFT note which, if it was genuine, ought to have been registered with the Bank of England.

When this came about, I took it to my noble friend Lord Strathclyde and asked what we should do with it. He said, “Give it to Lord Sassoon. He is the Treasury”. So I did, and my noble friend Lord Sassoon looked at it and said immediately, “This is rubbish. It is far too much money. It would stick out like a sore thumb and you cannot see it in the Royal Bank of Scotland accounts”. He went on to say, “The gold backing it is ridiculous. Only 1,507 tonnes of gold has been mined in the history of the world, so you cannot have 750,000 tonnes”. That is true. The third thing he said was, “It is a scam”, and I agree with him. The problem is that at that point we stopped looking, but we should have asked what the scam was instead of just nodding it off.

We have never resolved it. Today, I have this quite frightening piece of paper, which is my justification for bringing it into this meeting. It is available on the internet and I am astonished that it has not already been unearthed by the Treasury because every alarm bell in the land should be ringing if it has. It is from the general audit office of the Federal Reserve in Washington—the real Federal Reserve—and its audit review to the end of July 2010 on the Federal Reserve Bank of New York. It has on it some 20 banks listed to which $16.115 trillion is outstanding in loans. That is the sore thumb that was being looked for by my noble friend Lord Sassoon. But more particularly there are two other interesting things. The first is that Barclays Bank has $868 billion of loan, and the Royal Bank of Scotland has $541 billion, in which case one has to ask a question, because they could have earned back in three weeks their entire indebtedness and could pay off the taxpayers of Britain. Why have they not done so and could we please ask them to put a cheque in the post tonight for the whole $46 billion?

The next thing that is wrong with it is that every bank on this list, without exception, is an MTN-registered bank, which means that they are registered to use medium-term notes to move funds between themselves with an agreed profit-share formula, in which case these banks are investing this money and, most extraordinarily, not a penny of interest does the Federal Bank of New York want paid on that vast amount, $16 trillion. Anyone who knows what the IMF rules are will immediately smell a rat. The IMF has very strict rules for validating dodgy money. There are two ways of doing it. You either pass it through a major central bank like the Bank of England, which apparently refused to touch this, or you put it through an MTN-trading bank, which is then able to use the funds on the overnight European MTN trading market where they can earn between 1 per cent and 2.5 per cent profit per night. The compound interest on that sum is huge. If it is genuine, a vast profit is being made on this money somewhere.

I believe that this is now such an important issue that I have put everything that I have got on the subject on to a 104-megabyte memory thumb. I want the Government to take it all, put it to some suitable investigative bureau and find out the truth of what is going on here, because something is very seriously wrong. Either we have a huge amount of tax uncollected on profits made or we have a vast amount of money festering away in the European banking system which is not real money, in which case we need to take it back. I ask for an investigation and for noble Lords to support my plea.