Banks: Cash Withdrawals

Lord Kirkhope of Harrogate Excerpts

Tuesday 11th June 2019 Lords Chamber

[Lord Young of Cookham]

I understand the noble Baroness’s concern for those who do not have access to free-to-use ATMs. I hope she will be reassured that the number of free-to-use ATMs in Scotland increased by 85% between 2008 and 2018, from 2,800 to 5,200. But the noble Baroness’s Question encapsulates a real challenge for Governments today: how do we respond to technological change which is cost-effective, popular, cheap and embraced by the vast majority but, for whatever reason, is not used by a minority? The use of cash fell by 16% last year. Only 28% of transactions were in cash—that figure is forecast to fall to 10%—and 5 million adults apparently did not use cash at all last year. The Government’s policy is quite clear: we want the Payment Systems Regulator to hold LINK’s feet to the fire—to its public commitment to maintain the broad spread of free-to-use ATMs. It has powers of direction and can levy fines to deliver that commitment. On her final question, if you ban charges you lose the pay-to-use ATMs, of course, and might prejudice the existence of the free-to-use ATMs by reducing the revenue stream for ATM owners.

[Lord Kirkhope of Harrogate (Con)]

Does my noble friend not agree that it is very important to remember that ATMs do not just dispense cash? They are increasingly available for a range of banking activities, and very usefully too. Does my noble friend agree that when branches of banks close, we should encourage as much as possible that those important facilities are retained somewhere in the community—whether a village or town—that is losing its bank branches? Is that not a good thing which we should be encouraging?

[Lord Young of Cookham]

My noble friend is quite right; they are used not just for cash withdrawals but often for deposits or balance queries. I very much hope that banks respond to my noble friend’s suggestion that if they have to close the last branch in a town or village, they ensure that they leave behind a free-to-use ATM that will replace at least some of the facilities that it used to provide.

Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018

Lord Kirkhope of Harrogate Excerpts

Wednesday 23rd January 2019 Grand Committee

[Lord Young of Cookham (Con)]

My Lords, this statutory instrument, laid under the EU withdrawal Act 2018, is part of the legislative programme that the Treasury is undertaking to ensure that there continues to be a functioning legislative and regulatory regime for financial services in the EU. The statutory instrument has been debated and approved by the House of Commons. The SI will fix deficiencies in UK anti-money laundering law to ensure it continues to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the Act, providing continuity by maintaining existing legislation at the point of exit.

Turning to the substance of the SI, many noble Lords will be familiar with existing anti-money laundering legislation. The money laundering regulations set out the requirements on regulated firms to combat money laundering and terrorist financing. Further, the EU Funds Transfer Regulation specifies what information must accompany electronic transfers of funds. Finally, the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations established the Office of Professional Body Anti-Money Laundering Supervision within the Financial Conduct Authority in early 2018. Anti-money laundering legislation is designed to combat illicit finance, while minimising the burden on legitimate businesses.

In a no-deal scenario, the UK would be outside the EEA, and outside the EU’s legal, supervisory and financial regulatory framework. Therefore, these three pieces of anti-money laundering legislation would need to be updated to reflect the new position of the UK, and to ensure that the provisions work properly in a no-deal scenario. The changes primarily affect the financial services sector, but the impact will be minimal and we have engaged with industry extensively to ensure that affected firms are aware of the changes that we are making. These draft regulations will make the following changes to the UK’s anti-money laundering regime.

First, this SI will equalise the regulatory treatment of European Economic Area member states and “third countries” for correspondent banking relationships—that is, when one bank provides banking services on behalf of another bank. Currently, UK financial institutions apply enhanced due diligence measures to correspondent banking relationships with financial institutions outside the EEA. However, these measures are not required for intra-EEA relationships.

This SI will equalise the regulatory treatment, meaning that enhanced due diligence will be required for all correspondent banking relationships. This change better aligns with the Financial Action Task Force standards on the issue, and the existing practice of many UK institutions, which already apply enhanced due diligence because of the risks associated with correspondent banking relationships. The SI will also equalise regulatory requirements on the information about the payer and payee accompanying electronic transfers of funds. Therefore, UK payment service providers will be required to provide higher volumes of information accompanying transfers into EEA member states and other countries. These changes are being made to reflect the UK’s new position outside of the EU’s regulatory framework.

Secondly, this SI will transfer from the Commission the responsibility to make technical standards, which specify the additional measures required to be taken by credit and financial institutions with branches or subsidiaries abroad, to the Financial Conduct Authority. These standards are of a type similar to those currently made by the FCA, in an area where they have technical expertise. Therefore, the FCA is the appropriate body to take on this responsibility. The transfer of this power is necessary because the relevant standards are currently made by the European Commission.

Thirdly, this SI removes the obligation for certain UK persons to have regard to guidelines published by the European supervisory authorities. The UK will be outside the EU’s regulatory framework, so it would be inappropriate for UK persons to be legally required to have regard to these guidelines. Firms will continue to be required to have regard to guidance developed by UK supervisory authorities and industry bodies, thereby maintaining the same strong standards to counter money laundering and terrorist financing.

Finally, the current money laundering regulations require certain information to be communicated to EU institutions. These provisions will be removed, as they would no longer be appropriate once the UK is no longer a member of the EU. The House of Lords Secondary Legislation Scrutiny Committee queried the change in requirements to transmit information to EU institutions, and whether the FCA would be co-operating with its counterparts in other countries to combat illicit finance. However, the changes to information-submission requirements made by this SI relate to specific duties to provide information directly to EU institutions, such as the national risk assessment of money laundering and terrorist financing.

Legal obligations to submit this information would be inappropriate once the UK leaves the EU. It is important to emphasise that UK supervisory authorities, including the FCA, will continue to co-operate extensively and make information available to overseas anti-money laundering authorities in relation to firms which have offices within the UK. Therefore, UK authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering.

The Treasury has been working very closely with the FCA in the drafting of this instrument. It has also engaged extensively with the financial services industry on this SI, including UK Finance and relevant trade associations, and will continue to do so in relation to other SIs within the onshoring programme. Last November, the Treasury published the instrument in draft, along with an explanatory policy note to maximise transparency to Parliament and industry. The Treasury considers the net impact of business to be less than £5 million, so a full impact assessment has not been carried out.

In summary, this Government believe that the proposed legislation is necessary to ensure that the UK’s anti-money laundering and counterterrorist financing regime operates effectively, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope noble Lords will join me in supporting these regulations.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I hope it will be all right for me to intervene in this matter. As a former Member of the European Parliament, I had something to do with the fourth anti-money laundering directive and the high standards required by it and I would like to ask my noble friend one or two questions.

First, we have been obliged to operate enhanced due diligence only to countries outside the EEA, and post-Brexit we will find ourselves required to deal with all countries equally—in other words, with enhanced due diligence in all cases. I know my noble friend has just referred to the fact that many UK institutions apply this enhanced approach already and that the Financial Action Task Force recommends those standards but I would like to inquire of him as to the position regarding others. He said “most institutions” but I believe quite a considerable number do not wish to apply enhanced due diligence in countries where we are satisfied that the standards are common in the EEA and, of course, in the EU. I am rather worried about this and the obligations that it will now put on institutions which they did not have before. I think it is quite a significant change.

Secondly, I am interested in the issue of information. When payment service providers transfer funds outside the EU, there is a need for higher levels of information. I am concerned that, once again, post-Brexit we will require of UK PSPs a much greater volume of information accompanying the transfer of funds into all the EU states as well as those outside. Again, I wonder about the extent of those obligations and the amount of information. Is my noble friend aware of how that extra information should be obtained and what it would consist of? Can he advise me now or write to me if he cannot?

Thirdly, although it is not mentioned in this measure at all, I am quite curious as to whether any of these things will affect the status of so-called politically exposed persons. Currently, as noble Lords know, the term covers quite a large number of people, particularly those who have had a connection overseas—as they put it from this country—with receipts of moneys or involvement in business affairs. I wonder whether by bringing this back into this country and no longer being obliged to apply the rules that applied before, this will then recategorise or decategorise large numbers of people currently designated as PEPs and therefore subject to a very much higher level of scrutiny by our financial institutions.

I know that this is not a policy change as such but clearly this measure is a big change to obligations and procedures. There must be some costs attached and quite a lot of organisations may not be ready to carry out these new responsibilities in terms of the due diligence or, indeed, provision of information. Is my noble friend satisfied that, in the consultations and discussions that have taken place so far, our institutions are satisfied that they will be able to cope with this in the timescale we have?

--- Later in debate ---

[Lord Young of Cookham]

I am grateful to the noble Baroness. The last thing we want is to have any turbulence at the point of transition or to have legitimate transactions held up. The FCA will be consulting with the banks and payment services providers concerned, particularly in the light of the transitional arrangements that I mentioned earlier. Of course they have known for some time that these changes are on the way so that they have been able to prepare for them. However, one of the consequences of what I have just said is that there does not have to be a sudden switchover on 30 March or 1 April because the Treasury and the FCA will be introducing transitional arrangements. There will be due warning before any change takes place.

[Lord Kirkhope of Harrogate]

The concern of those of us who have been involved over the years with these anti-money laundering directives is the way they have been implemented in different member states. This country has always been more than diligent about making sure that any directive we have prepared in Brussels has been implemented to the nth degree over here. In doing so, the FCA has been used in a way that I believe has meant that a lot of financial institutions have gone further than was necessary not only for their own economic convenience as much as anything else but also because we in Britain have been more draconian in terms of implementation as the anti-money laundering directives have been developed, in particular this fourth one. The whole point is proportionality; in other words, it is important that we have now introduced more balance to the way in which we hope that the fourth directive will be implemented in member states. However, yet again in this country the FCA and our own financial institutions have been more than zealous in their activities.

My noble friend suggests that we should always look for higher standards, but standards should not always be equated with obligations. The obligations we have placed upon our consumers and others in this country are very strong indeed. I hope that the FCA will not use the proposed flexibility and more room to manoeuvre to go in the wrong direction because that would put us at a massive disadvantage economically.

[Lord Young of Cookham]

My noble friend will know that when we leave the EU, the obligation that we already have will be transferred. Thereafter, looking to the future, we will no longer be bound by EU regulation, so the opportunity for gold-plating them will not exist; we will be in control of our destiny. I am sure that my noble friend would not want in any way to water down the robust regime we have in this country to deal with money laundering, terrorist financing and the rest. We must get the balance right, which is what I think my noble friend was saying.

Wheeled Goods Vehicles

Lord Kirkhope of Harrogate Excerpts

Thursday 13th December 2018 Lords Chamber

[Lord Young of Cookham]

As the noble Lord will know, there are regular spot checks on roads in this country where heavy goods and other vehicles are stopped and checked to make sure that they comply. I will supply the noble Lord with more information on the effectiveness of these spot checks and how often they are carried out.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I had direct experience when I was a Member of the European Parliament of a constituent whose daughter was killed by a lorry because the visibility from that lorry was not adequate. I think that changes have been made in relation to the requirements for extra mirrors for observation around a vehicle of that kind. But sometimes the outside mirrors are obstructed with debris or become, frankly, useless during the vehicle’s use. Are we sufficiently able to move on and do things quickly when we find new ways in which we can help to protect those who are in contact with or close to heavy goods vehicles?

[Lord Young of Cookham]

My noble friend is quite right that the UK played a leading role in changing international standards. In July 2016, measures for large HGVs with improved mirrors came into effect, largely as a result of our intervention. More work is going on in what is called detection technology, which detects vulnerable road users, and measures using cameras. There will be new requirements for buses and lorries, which could come into effect in 2021 under the direct vision standards initiative.

European Union (Withdrawal) Bill

Lord Kirkhope of Harrogate Excerpts

Tuesday 30th January 2018 Lords Chamber

[Lord Kirkhope of Harrogate (Con)]

My Lords, I seek to avoid being described as a remoaner so, with your forbearance, I shall instead indulge myself in a little nostalgia.

I do not understand why we seem unable to comprehend that ever since we joined the then European Economic Community, the UK has been a leading player in the reform and expansion of a free, democratic Europe. Our success in changing things has never been properly regarded in this country, or properly exploited. Far from losing influence, we have been wielding it year after year, treaty after treaty, process after process. This power has been executed by successive United Kingdom Governments, aided by our growing influence in the European institutions as they have developed. In the Commission—noble Lords have served as Commissioners—our representation has put great energy into its respective roles. In the Parliament, where I spent the past 17 years, UK MEPs, with one or two notable exceptions, have provided and still provide the democratic input to make and improve European laws for our benefit. When I went to the European Parliament in 1999, Europe was made up of 15 states, and the French language was often the default. Over the next 10 years, as new states joined, the preferred default language became English, and with that came more of the English way in procedures and methods. We failed to capitalise on that, to our enormous discredit.

The single market that now seems so terrible to some of our harder Brexit friends was driven through by Margaret Thatcher and Lord Cockfield. The enlargement of Europe to welcome the states emerging from all the years of dictatorship that they and their peoples had endured was again driven by us—driven by us, my Lords. Lately, the close working of our security services and police, including Europol, a service run by a Brit and on good, proven UK lines, has allowed us to defend British interests in a way that isolation and so-called independence would never allow.

When David Cameron asked our EU partners for some further reforms ahead of the referendum, he got promises which were substantial, not, as some said here, minimal. I know that because I was there, talking to European colleagues. The UK was again in the lead, pushing for reforms which, if they had been implemented, would have shown not only the progress in Europe that was desirable for all but, more importantly, would have endorsed and confirmed our leading role for the 21st century.

It is clear that too many colleagues, especially in the other place, are frozen in an earlier era. They demonstrated some ignorance during the referendum campaign when they presented to the populace an image of Europe that was long gone—a Europe that existed before Margaret Thatcher and David Cameron, and a Europe that ceased to exist as UK influence increased.

One further matter: we talk about the will of the people in the referendum. I have recently been reading some general election manifestos of both major parties before they entered government. Time does not permit me to list the major promises they made, but the list of promises not met when the realities of government presented themselves is numerous. Changes of direction have been common, especially when either the aims became undeliverable when the facts were known, or because, by implementing the policy, the people of the UK would have been harmed, or at least would end up worse off. The Government present a future full of challenges and opportunities, and not a single noble Lord or noble Baroness would balk at having challenges or opportunities but, for the population as a whole, that bravado may not always strike the positive note that the Government intend.

I refer briefly to the amendment moved by the noble Lord, Lord Adonis. The question of a second referendum keeps coming up. I have to state quite clearly that I do not think a second referendum is a sensible approach. That is because the elected House of Commons and its Members, whose names are well known and whose political views on the subject of EU withdrawal are or will be well known, carry the full responsibility for the decisions they take—not the Executive, who supposedly act on the decisions taken in Parliament, but those MPs, who have a grave duty to act in the interests of their constituents and to do them no harm. That must continue. We will see whether they do their duty, because if they get this wrong, they will pay the inevitable price of democracy—a heavy price in some cases.

Once the terms of our withdrawal become clear, it is the duty of the elected House to reflect on whether those terms give us the opportunities that the Government speak of or whether, in implementing them, it is consigning our citizens to long-term decline.

Anti-corruption Strategy

Lord Kirkhope of Harrogate Excerpts

Monday 10th July 2017 Lords Chamber

[Lord Young of Cookham]

The noble Lord asked a number of questions. First, he is quite right: the deadline has been missed. We hoped to publish the updated strategy by December last year. There was some turbulence in Whitehall following the outcome of the referendum and then, in March, when the inter-ministerial group met to consider the draft strategy, there was a further discontinuity with the general election. However, a near-final draft of the document is being prepared and we hope to publish it shortly. There has been a series of anti-corruption champions: Hilary Benn, Jack Straw and Ken Clarke. Eric Pickles was the last but since the election Sir Eric is no longer a Member of Parliament. We hope to appoint a new champion in due course.

On the noble Lord’s second point about the Jolly Roger, I prefer the union jack. However, he is quite right: this country has a reputation for integrity and fairness throughout the world. That helps us win export orders and inward investment. The noble Lord may know that in a recent analysis of integrity, the UK was ranked joint 10th out of 176 on the Transparency International corruption perceptions index. He is quite right: we value our reputation and are determined to maintain and enhance it after Brexit.

[Lord Kirkhope of Harrogate (Con)]

My Lords, the Government have previously indicated to the House that they were attempting to meet a target by the end of June this year to have central registers of beneficial ownership opened in the Crown dependencies and the overseas territories. I believe it is now July. Therefore, I would be very grateful if my noble friend updated us on the current position.

[Lord Young of Cookham]

I am grateful to my noble friend. It is indeed now July, and I am happy to tell him that good progress has been made with the overseas territories and the Crown dependencies. Most of the larger territories already had these central registers in place. I think that only two, or possibly three, have not met the deadline, and they are making good progress. Therefore, significant information is now available, almost real time, in this country for law enforcement and HMRC because of the central registers of beneficial ownership that the overseas territories and the Crown dependencies have now introduced following last year’s London summit.