Baroness Williams of Crosby
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Financial Crime: Legislation
Baroness Williams of Crosby Excerpts
Thursday 17th March 2011
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(13 years, 8 months ago)
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Moved By
Baroness Williams of Crosby
To call attention to the United Kingdom’s record on legislation regarding bribery, tax avoidance, corruption and money laundering; and to move for papers.
Baroness Williams of Crosby: My Lords, it could well be argued that corruption is perhaps the major single threat to good governance and to democracy in the world today. If we look just at the two countries that my noble friend Lord Howell of Guildford has always been extremely concerned about, China and India, they each confront huge problems with corruption. In the case of China, extreme measures have been taken to try to deal with it including, in some cases, capital punishment. In India, to quote its report of last week, the Economist said on 12 March:
“Indians’ anger over rising corruption has reached feverish levels”.
It then refers to the $40 billion in revenues that seem to have been lost as a result of deals over telecommunications licences. These are huge issues for India and for China.
Here in this country, it is a long time since we passed serious legislation with regard to bribery and corruption; the last time we did was no later than 1916. One of the consequences is that in many ways our legislation is seriously out of date.
At Question Time we have just been discussing Bahrain. It is perhaps worth saying that one of the major factors in the uprisings throughout the Arab world has been resentment at the sense of widespread corruption and at the benefit that has gone to leaders, many of them not elected, in some cases saving substantial sums of money for themselves. It would be fair to say that we in this country can remember the argument about President Abacha of Nigeria, who salted away many billions of dollars that were then money-laundered through financial arrangements where in most cases the money was not recovered, in a country that desperately needed it.
Today in countries such as Egypt, Libya and Tunisia, huge sums of money appear to have passed out of the possession of their own populations and passed via money-laundering methods into private accounts of various kinds. The present UK Government have been assiduous in freezing some of those assets so that they can be recovered for the people of those countries; I give them due credit on that point. But there is much further to go. One has to say, quite honestly, that a number of our own banks have been profoundly involved in money-laundering activities, at least in the past, that have hidden money coming not only from dictatorial rulers but from the pervasive effects of organised crime.
When we look at corruption today, we have to say right away that the issue requires two parties to it: the people who raise the money—the people who make the bribes—and the people who launder that money at the end of the day. In that respect the Federation of Small Businesses, which has sent me a briefing note, says that it is important that the UK maintains its reputation as a sound and ethical centre in which to do business. I cannot echo that too strongly.
The domestic record of our own country has always been regarded internationally as good. The United Kingdom has been thought to be a relatively incorrupt country. However, we would be less than blunt and honest if we did not admit that our domestic reputation had been substantially damaged by the parliamentary expenses scandal. People may say that it was exaggerated but the huge media coverage that it got, not just in this country but throughout the world, undoubtedly damaged the otherwise high reputation of the UK for domestic non-corruption. It is also the case that the issue of phone-hacking, although very separate, has done some damage to the sense that the UK is free of criminal activity in the way that it conducts its business and its public discussion.
Our international record, however, is bad and getting worse. Some of my colleagues will talk about the way in which Britain’s standing on the index of corruption has dropped dramatically over the past few years. I will not pursue that now beyond saying that our international record has been damaged, particularly since the decision not to continue with the investigation by the Serious Fraud Office into BAE’s relations with Saudi Arabia. The investigation was dismissed by the then Prime Minister on the grounds that it might assist terrorism and dry up sources of intelligence, but nevertheless it did a great deal of damage to the reputation of British business. The Serious Fraud Office is even now pursuing the fallout from that discussion in South Africa and elsewhere, with strong indications that corrupt practices on the part of a major British company were involved.
More recently still there has been a great deal of discussion and controversy over the role of the United Kingdom on the bribery convention. I shall again be very frank. I declare a past interest as for some years I was one of the OECD’s advisers on employment policy, during which time I discovered a lot about its concerns. One of the major concerns of the so-called financial affairs task force, headed by a very distinguished Swiss professor, Monsieur Pieth, was to apply continual pressure on OECD members to sign bribery conventions. Its first major argument was with Japan, which finally signed a bribery convention after many years of delay. That left only one country that had not done so—the United Kingdom. For 13 years we were pressed to draw up anti-bribery legislation and all that time we somehow managed to escape doing so. The previous Labour Government, at the end of their period of office, brought forward bribery legislation, with the strong support of all parties in both Houses of Parliament. There can be no argument that this was seen to be a divisive matter.
The bribery convention came about after years of pressure, particularly on the part of the United States, which passed an extremely fierce piece of bribery legislation, the Foreign Corrupt Practices Act. In the 1980s, the reputation of the United States was poor. It was deeply involved in corrupt practices. In the 1990s, it became aware of that and passed powerful legislation. The United States then became a pioneer—a beacon, if you like—in the battle against international corruption, and pressed the other countries of the OECD in this regard, as I have already described. However, it did more than that. The United States Justice Department is extremely powerful, very determined and has brought one British company after another to book. Fines of up to £250 million have been levied on BAE alone, to take one example only. There are many other examples where the long arm of the Justice Department has reached out across borders to bring to justice any company that has a UK presence but operates internationally.
We are now a signatory to the bribery convention. Good legislation was brought forward by the noble Lord, Lord Bach, and others at the end of the Labour Government’s period of office. However, that does not wholly excuse them from the very long delays and the desperate attempts to stop this matter being advanced. But now, with the coalition Government, we have a further problem. The terms of the bribery convention have been met and the legislation has been drafted, approved and passed in Parliament, but now we are told that there will be a delay in implementation. I cannot say too strongly how troubling that is from the point of view of those who do not wish the UK well and will use this as a reason for saying that once again we are trying to avoid the legislation that now applies to all the other OECD nation states.
I wish to say a word or two about this delay. Apparently, there has been strong pressure from business to produce guidelines that will deal with any ambiguities in the Act of Parliament. That may be said to be fair enough: business needs to know where it stands. On the other hand, it must be said that to try to escape the effects of the bribery convention is deeply damaging to British business as it suggests that our business and trade depend on special deals, often with very dodgy regimes indeed. We have to get away from using facilitation payments and all other forms of bribery in order to do our business. It will not serve us in the long term and, I repeat, it will do huge damage to developing countries with which we are closely associated and where our bribery equals their corruption.
I will say just a word or two about where we are. I wonder very much about the pressures brought to bear by a mysterious and little-known body called the MNCG—the Multinational Chairman’s Group. This is a group of chairmen of British multinational companies, including some of the finest names in British business. That body appears to have been keen to try to soften the impact of the Bribery Act on business. I strongly urge the group to look again at that. These are great companies with great reputations and, in the end, it cannot be in their interests to be seen to be in any way supportive of bribery.
All that will turn on two things: timing and implementation. On timing, we may well have a month or two of grace, because the Government have indicated that they will again discuss guidance and then issue it, probably within two or three months. I might say gently to the House that there have now been no fewer than 11 consultative periods about bribery, and that would seem to be sufficient, even for an audience as articulate and discussant as Members of the two Houses of the British Parliament. Surely after 11 consultations we are close to what we need.
On implementation, I want to ask the Minister, my noble friend Lord Sassoon, if he can tell us more about who is responsible for implementation. The Serious Fraud Office has begun to be an effective arm of British government—much more effective than it used to be. Its director, Richard Alderman, has said in so many words, in a letter to the Secretary of State for Justice, Kenneth Clarke, that he has real concerns about further delays and that this will not stand the United Kingdom in good stead. He was supported by one of the most distinguished Members of this House, the noble and learned Lord, Lord Howe of Aberavon, who said that we could not argue for delay for very much longer. He said that in clear terms a few weeks ago.
Those are the questions. What will be the implementing body? Will it be the Home Office, the SFO or some combination of the two? How aware are they of the significance and importance of doing what they are doing at a decent and rapid pace? Finally, there is the issue of the precise date by which the Minister hopes we will have completed the process of consulting over guidance, to bring this long-required legislation to book and make it operate.
I conclude where I began. Corruption throughout much of the developing world cannot work for very long without the silent co-operation of money launderers, banks and many others. The system of so-called suspicious activities reports has been very effective in beginning to limit money-laundering—much of it the laundering of terrorist money, some of it drug money, all of it bad money. I plead with the Government to take this issue now to its conclusion, so that we can stand up and be counted among those who find corruption and bribery utterly unacceptable forms of behaviour in a free and modern business world.
“Indians’ anger over rising corruption has reached feverish levels”.
It then refers to the $40 billion in revenues that seem to have been lost as a result of deals over telecommunications licences. These are huge issues for India and for China.
Here in this country, it is a long time since we passed serious legislation with regard to bribery and corruption; the last time we did was no later than 1916. One of the consequences is that in many ways our legislation is seriously out of date.
At Question Time we have just been discussing Bahrain. It is perhaps worth saying that one of the major factors in the uprisings throughout the Arab world has been resentment at the sense of widespread corruption and at the benefit that has gone to leaders, many of them not elected, in some cases saving substantial sums of money for themselves. It would be fair to say that we in this country can remember the argument about President Abacha of Nigeria, who salted away many billions of dollars that were then money-laundered through financial arrangements where in most cases the money was not recovered, in a country that desperately needed it.
Today in countries such as Egypt, Libya and Tunisia, huge sums of money appear to have passed out of the possession of their own populations and passed via money-laundering methods into private accounts of various kinds. The present UK Government have been assiduous in freezing some of those assets so that they can be recovered for the people of those countries; I give them due credit on that point. But there is much further to go. One has to say, quite honestly, that a number of our own banks have been profoundly involved in money-laundering activities, at least in the past, that have hidden money coming not only from dictatorial rulers but from the pervasive effects of organised crime.
When we look at corruption today, we have to say right away that the issue requires two parties to it: the people who raise the money—the people who make the bribes—and the people who launder that money at the end of the day. In that respect the Federation of Small Businesses, which has sent me a briefing note, says that it is important that the UK maintains its reputation as a sound and ethical centre in which to do business. I cannot echo that too strongly.
The domestic record of our own country has always been regarded internationally as good. The United Kingdom has been thought to be a relatively incorrupt country. However, we would be less than blunt and honest if we did not admit that our domestic reputation had been substantially damaged by the parliamentary expenses scandal. People may say that it was exaggerated but the huge media coverage that it got, not just in this country but throughout the world, undoubtedly damaged the otherwise high reputation of the UK for domestic non-corruption. It is also the case that the issue of phone-hacking, although very separate, has done some damage to the sense that the UK is free of criminal activity in the way that it conducts its business and its public discussion.
Our international record, however, is bad and getting worse. Some of my colleagues will talk about the way in which Britain’s standing on the index of corruption has dropped dramatically over the past few years. I will not pursue that now beyond saying that our international record has been damaged, particularly since the decision not to continue with the investigation by the Serious Fraud Office into BAE’s relations with Saudi Arabia. The investigation was dismissed by the then Prime Minister on the grounds that it might assist terrorism and dry up sources of intelligence, but nevertheless it did a great deal of damage to the reputation of British business. The Serious Fraud Office is even now pursuing the fallout from that discussion in South Africa and elsewhere, with strong indications that corrupt practices on the part of a major British company were involved.
More recently still there has been a great deal of discussion and controversy over the role of the United Kingdom on the bribery convention. I shall again be very frank. I declare a past interest as for some years I was one of the OECD’s advisers on employment policy, during which time I discovered a lot about its concerns. One of the major concerns of the so-called financial affairs task force, headed by a very distinguished Swiss professor, Monsieur Pieth, was to apply continual pressure on OECD members to sign bribery conventions. Its first major argument was with Japan, which finally signed a bribery convention after many years of delay. That left only one country that had not done so—the United Kingdom. For 13 years we were pressed to draw up anti-bribery legislation and all that time we somehow managed to escape doing so. The previous Labour Government, at the end of their period of office, brought forward bribery legislation, with the strong support of all parties in both Houses of Parliament. There can be no argument that this was seen to be a divisive matter.
The bribery convention came about after years of pressure, particularly on the part of the United States, which passed an extremely fierce piece of bribery legislation, the Foreign Corrupt Practices Act. In the 1980s, the reputation of the United States was poor. It was deeply involved in corrupt practices. In the 1990s, it became aware of that and passed powerful legislation. The United States then became a pioneer—a beacon, if you like—in the battle against international corruption, and pressed the other countries of the OECD in this regard, as I have already described. However, it did more than that. The United States Justice Department is extremely powerful, very determined and has brought one British company after another to book. Fines of up to £250 million have been levied on BAE alone, to take one example only. There are many other examples where the long arm of the Justice Department has reached out across borders to bring to justice any company that has a UK presence but operates internationally.
We are now a signatory to the bribery convention. Good legislation was brought forward by the noble Lord, Lord Bach, and others at the end of the Labour Government’s period of office. However, that does not wholly excuse them from the very long delays and the desperate attempts to stop this matter being advanced. But now, with the coalition Government, we have a further problem. The terms of the bribery convention have been met and the legislation has been drafted, approved and passed in Parliament, but now we are told that there will be a delay in implementation. I cannot say too strongly how troubling that is from the point of view of those who do not wish the UK well and will use this as a reason for saying that once again we are trying to avoid the legislation that now applies to all the other OECD nation states.
I wish to say a word or two about this delay. Apparently, there has been strong pressure from business to produce guidelines that will deal with any ambiguities in the Act of Parliament. That may be said to be fair enough: business needs to know where it stands. On the other hand, it must be said that to try to escape the effects of the bribery convention is deeply damaging to British business as it suggests that our business and trade depend on special deals, often with very dodgy regimes indeed. We have to get away from using facilitation payments and all other forms of bribery in order to do our business. It will not serve us in the long term and, I repeat, it will do huge damage to developing countries with which we are closely associated and where our bribery equals their corruption.
I will say just a word or two about where we are. I wonder very much about the pressures brought to bear by a mysterious and little-known body called the MNCG—the Multinational Chairman’s Group. This is a group of chairmen of British multinational companies, including some of the finest names in British business. That body appears to have been keen to try to soften the impact of the Bribery Act on business. I strongly urge the group to look again at that. These are great companies with great reputations and, in the end, it cannot be in their interests to be seen to be in any way supportive of bribery.
All that will turn on two things: timing and implementation. On timing, we may well have a month or two of grace, because the Government have indicated that they will again discuss guidance and then issue it, probably within two or three months. I might say gently to the House that there have now been no fewer than 11 consultative periods about bribery, and that would seem to be sufficient, even for an audience as articulate and discussant as Members of the two Houses of the British Parliament. Surely after 11 consultations we are close to what we need.
On implementation, I want to ask the Minister, my noble friend Lord Sassoon, if he can tell us more about who is responsible for implementation. The Serious Fraud Office has begun to be an effective arm of British government—much more effective than it used to be. Its director, Richard Alderman, has said in so many words, in a letter to the Secretary of State for Justice, Kenneth Clarke, that he has real concerns about further delays and that this will not stand the United Kingdom in good stead. He was supported by one of the most distinguished Members of this House, the noble and learned Lord, Lord Howe of Aberavon, who said that we could not argue for delay for very much longer. He said that in clear terms a few weeks ago.
Those are the questions. What will be the implementing body? Will it be the Home Office, the SFO or some combination of the two? How aware are they of the significance and importance of doing what they are doing at a decent and rapid pace? Finally, there is the issue of the precise date by which the Minister hopes we will have completed the process of consulting over guidance, to bring this long-required legislation to book and make it operate.
I conclude where I began. Corruption throughout much of the developing world cannot work for very long without the silent co-operation of money launderers, banks and many others. The system of so-called suspicious activities reports has been very effective in beginning to limit money-laundering—much of it the laundering of terrorist money, some of it drug money, all of it bad money. I plead with the Government to take this issue now to its conclusion, so that we can stand up and be counted among those who find corruption and bribery utterly unacceptable forms of behaviour in a free and modern business world.
--- Later in debate ---
Baroness Williams of Crosby
My Lords, I thank all those who took part in the debate, which showed once again the extraordinary sweep of experience in this House. I agree with my noble friend Lord Sassoon that the debate has been searching and constructive. I thank him personally because what he said laid to rest many concerns and fears that noble Lords had about the implementation of the Bribery Act. That will be appreciated also in overseas circles, for which I am very grateful.
I end by saying that on the walls of my sitting-room I had a series of lithographs by William Hogarth called “The Election”. I am picking up on what the noble Lord, Lord Davies of Oldham, said when he reminded us that corruption and bribery are hardly new actors on the stage. It was perhaps appropriate that the whole set of lithographs was stolen; that seemed to be the proper end. The series was a reminder of how strong corruption in the democratic system was in the 17th and 18th centuries. We came out of that primarily because of the extraordinarily powerful legislation laid down for public service towards the end of the 19th century by William Gladstone and other famous Prime Ministers. It is perhaps worth putting on record our gratitude to public servants, in the way that the noble Lord, Lord Davies of Oldham, expressed, for their consistent very high standards and moral quality.
I thank the noble Lord, Lord Parekh, for what he said about the need for us to be more aware of a moral dimension to what we do in the financial and economic world—and, indeed, more generally—and about the danger that we could be slowly undermined by failing to pay attention to it, failing to bring our legislation up to date and failing to take it sufficiently seriously. I thank him for what he contributed to the debate and I thank all noble Lords who took part.
Motion withdrawn.