Domestic Politically Exposed Persons: Money Laundering Rules

Debate between Charles Walker and Fiona Mactaggart

Wednesday 20th January 2016 Commons Chamber

[Mr Charles Walker (Broxbourne) (Con)]

It is a great honour and privilege to have secured tonight’s debate. I note that it follows on from the proceeds of crime debate, so it is both appropriate and timely.

It is a truism that international money laundering is a serious crime, and the UK Government are right to want to both persecute and prosecute those responsible. The legislation contained in both the third money laundering directive and the soon-to-be-introduced fourth directive is wide in its scope and is being aggressively applied by the banks. Although my debate deals specifically with politically exposed persons, my concerns can be more widely read across to the many law-abiding professional people in this country who are experiencing difficulties with their bank or in opening a new bank account.

In setting out the scene for tonight’s debate, I thought it would be helpful if I defined what a politically exposed person is in relation to the Money Laundering Regulations 2007. The regulations transpose the third money laundering directive into UK law. I will quote from the 2005 report of Joint Money Laundering Steering Group. This is a direct quote from its guidance:

“Senior political figure is a senior figure in the executive, legislative, administrative, military or judicial branches of a government (elected or non-elected), a senior figure of a major political party, or a senior executive of a government-owned corporation. It includes any corporate entity, partnership or trust relationship that has been established by, or for the benefit of, a senior political figure.

Immediate family typically includes the person’s parents, siblings, spouse, children, in-laws, grandparents and grandchildren where this can be ascertained.

Close associate typically includes a person who is widely and publicly known to maintain a close relationship with the senior political figure and includes a person who is in a position to conduct substantial domestic and international financial transactions on his or her behalf.”

Those definitions are reflected in the Money Laundering Regulations 2007, which were introduced pursuant to the third money laundering directive 2005. Importantly, however, although banks are choosing to apply the legislation to holders of domestic UK office, these people are specifically excluded from its scope.

Schedule 2 to the Money Laundering Regulations 2007 defines a PEP as being an individual, including their immediate family members or associates

“who is or has, at any time in the preceding year, been entrusted with a prominent public function by:

(i) a state other than the United Kingdom;

(ii) a Community institution; or (iii) an international body.”

It therefore specifically excludes Members of Parliament serving in the United Kingdom Parliament. In addition, the Joint Money Laundering Steering Group guidance for the UK financial sector states that the definition of a PEP used by banks

“only applies to those holding…a position in a state outside the UK”.

However, UK banks have consciously chosen to adopt a broader definition of a PEP, which also includes customers who hold political office within the UK. Banks argue that this is desirable in advance of the introduction of the fourth money laundering directive, due to come into force in 2017, which, unless amended, will apply to domestic politically exposed persons.

The rules around money laundering are a mess. I know this; the Government know this; the Chair of the Treasury Select Committee knows this; and the principals of many small and medium-sized businesses in my constituency and in others know this. The position of the UK banking sector, in its aggressive application of money laundering rules to domestic politicians, to their extended families and—I now fear—more widely to many of our law-abiding constituents, is known, in banking parlance, as de-risking.

What are the practical consequences of de-risking? In regards to the teenage children of MPs, it amounts to intrusive demands for information. One 18-year-old was recently contacted by her bank demanding that she produce personal information or face losing her banking facilities. This demand included information about her occupation, her employer’s name and address, details of any residential addresses she used and how much time she had spent at each address and information about regular sources of funds, such as income, student loans and funds from her parents.

A Back-Bench colleague, who agreed to be interviewed by his bank, was required to answer questions about his account dating back 25 years. This colleague is yet to turn 50.

[Fiona Mactaggart (Slough) (Lab)]

The regulations have affected me, as a Back-Bench Opposition MP. I have been involved in family charitable trusts where my fellow trustees have said, “Please Fiona, you can’t play a role in this philanthropic enterprise. Setting it up would be too complicated because you’re a politically exposed person.”

[Mr Walker]

The right hon. Lady’s timing is prescient, because I was about to say that some colleagues had been denied places as charity trustees or board members, simply because the charity could not deal with the financial compliance required to make the offer of the voluntary position worth while. These colleagues want to give their time and experience for free.

Another example of heavy-handedness concerns colleagues who retain a link with their professional practices. De-risking by banks means colleagues are struggling to open company bank accounts, often despite being required to do this by their own professional regulator, in order to look after and protect client moneys. In another case, a colleague’s 81-year-old father was summoned for an interview by his bank to verify his details and sources of wealth, despite his having been with the bank for more than 50 years.

Other colleagues have been asked to provide details of their parents’ financial assets, such as property, share and cash holdings. A son-in-law of a Back-Bench MP who owns his own business was recently informed that he had been identified as a politically exposed person and was required to provide details of his business’s transactions, as well as information about his personal account. In a similar vein, a Back-Bench MP’s son was required to provide information about his wife and details about her parents—his in-laws.

The actions of banks are, at best, highly intrusive and, at worst, in danger of restricting the ability of honest people, such as sons, daughters, brothers and sisters, to raise the money required to invest in and grow their business.

Parliamentary Voting System and Constituencies Bill

Debate between Charles Walker and Fiona Mactaggart

Monday 25th October 2010 Commons Chamber

[Mr Walker]

The hon. Gentleman makes his usual sparky intervention.

Rafts of leading academics and political commentators have recognised for a long time that there are far too many Ministers in this place. Sir John Major, the former Prime Minister, has argued that we could easily do as well with a reduction of 25% to 30%. Lord Turnbull, the former Cabinet Secretary, told the Select Committee on Public Administration earlier this year that the number of Ministers could be cut by 50%. Professor Anthony King has argued the same, as has Lord Norton of Louth.

Of course, those academics and political commentators are in good company. Our own Deputy Prime Minister argued in January that the number of Ministers should be reduced.

[Fiona Mactaggart]

Has the hon. Gentleman spoken more recently to the Deputy Prime Minister, because it is my impression that he is not likely to say today the things he said in January?

[Mr Walker]

The Deputy Prime Minister is a man of great integrity. I recognise that this is his Bill, and once he has heard the force of my argument he will rush here and demand a rethink from his Front Benchers.

Speaking at the Institute for Government in January, the Deputy Prime Minister called for the House of Commons to be reduced to 500 and for the number of Ministers across both Houses to be cut to 73. The Government’s demands are much more moderate. They are talking about reducing the size of the House to 600, but if we reduce it to 600, following the Deputy Prime Minister’s logic, we should reduce the number of Ministers by 15. That would tally with his mathematics, but, as I said, my new clause is modest. I am not calling for a reduction in the number of Ministers by 15. I know that many Members are demanding that I do that, but I shall not hear it. I am simply demanding a reduction in the number of Ministers by eight.

Many people here have argued privately in the corridors that there is no link between the size of the House of Commons and the number of Ministers. That is total nonsense. We know that as far back as the Bill of Rights of 1689 this House expressed concerns about the Crown having a presence here in the form of Ministers. The 1701 Act of Settlement tried extremely hard to remove Ministers from this place, because the politicians of that time wondered how one could serve the Crown as well as one’s constituents. Unfortunately, that never saw the light of day because the Executive got their way in 1706. As recently as 1926, if someone became a Minister of the Crown, he was required, in between general election periods, to resign his seat so that his constituents could decide whether their Member of Parliament could serve two masters—the interests of the constituents and the interests of the Crown.

That is where I am coming from. I am arguing for a modest reduction in the number of Ministers. We have had enormous ministerial inflation since 1983. Margaret Thatcher—we all remember her, that great lady—had 81 Ministers to run this country in 1983. We now require 95. Is the world so much more complex? I say to those who argue that it is that since 1983 we have privatised a large number of previously Government-owned industries and we have allowed Scotland, Wales and Northern Ireland to have their own devolved Assemblies. The number of Ministers has still risen inexorably.

I do not want to try your patience, Mr Streeter, by straying off new clause 7 and talking about inflation in the number of Parliamentary Private Secretaries, but we are now seeing 50 PPSs adding to an already burgeoning payroll. Although these people are not even paid, they are called the payroll vote. As far back as the 1960s, one could be a PPS and vote against the Government without danger of losing that role, but that is not the case today. The civil service code of conduct says that a PPS is required always to support their Government.