Financial Services (Banking Reform) Bill

Lord Brennan Excerpts

Tuesday 26th November 2013 Lords Chamber

Moved by

[Lord Brennan]

26: Clause 15, page 28, leave out lines 4 to 7 and insert—
“(b) those aspects involve, or might involve, a risk of—(i) serious consequences for the authorised person,(ii) serious consequences for business or other interests in the United Kingdom, or(iii) conduct or omissions by or on behalf of an authorised person otherwise than in accordance with the requirements of a relevant financial scheme giving rise to criminal liability.”

[Lord Brennan (Lab)]

My Lords, I declare an interest, as I have done before, as chairman of Global Financial Integrity. In Committee, the Minister, the noble Lord, Lord Newby, said:

“The scale of money-laundering is very large, and the Government and the regulators are determined to cut it down”.—[Official Report, 15/10/13; col. 406.]

The phrase “cut it down” was prudently chosen. Money-laundering, in its widest sense, never goes away. By “its widest sense”, I mean any attempt to create an illicit flow of money for illegal objectives: money-laundering, drugs, terrorism, bribery—whatever it might be. I will use the term in that sense throughout what I am about to say.

The purpose of this group of amendments in my name and that of my noble friend Lord Watson is to identify as clearly as possible a legislative framework within which our banks can be regulated and monitored so as to achieve one of the Financial Conduct Authority’s objectives: to preserve the integrity of the British banking system. I will deal with them briefly. Amendment 26 deals with a scope of responsibility of senior management so as to specify, in a very broad phrase,

“a relevant financial scheme giving rise to criminal liability”.

That is carefully chosen as an omnibus phrase to cover all the kinds of money-laundering activities that I have just described and relates such irresponsibility directly to senior management.

Amendment 28 deals with two issues: redundancy and specificity. “Redundancy” is in inverted commas because it was suggested in Committee that these changes were entirely unnecessary. Plainly, the Financial Conduct Authority and everybody else have a duty to obey the law—of course they do. However, equally, legislation has a component in it that should be designed to relate the existing law to the specific responsibilities to be carried out. No harm is done by such identification, and clarity is achieved. Nobody can say that they did not know. On specificity, subsection (4)(a) of proposed new Section 59ZA in Amendment 28 deals with a general provision for dealing with these schemes that might produce criminal liability. Paragraph (b) sets out the main statutes under which such activities can arise. Paragraph (b)(viii) makes clear that the FCA and the PRA themselves can refer to other relevant statutes, regulations or the like as they think appropriate and are specified in their rules.

Amendment 30 is an attempt, in substance, to achieve the objective of making all persons responsible who engage in money-laundering activities, so that there are no loopholes between different levels of staff and management. Amendments 45 and 47 would provide that the FCA and PRA should, in the banking standards rules, make rules about money-laundering similar to the effect of what these amendments seek to achieve.

--- Later in debate ---

[Lord Newby]

My Lords, I will cover that issue in my letter. I am sorry that the noble Lord thinks that the FCA note is ambiguous, because the fact that it is giving greater priority to this issue and being more intrusive and energetic should give him some comfort. However, as I say, I will write to him.

[Lord Brennan]

My Lords, first, I had a meeting with officials from the Treasury, the content of which was, in short form, declaratory and, in long form, advisory. It was declaratory when I explained to them that I and my colleagues with whom I am working on this problem were convinced that these amendments were necessary and that the Treasury officials and the Home Office man who was there should revise their thinking accordingly. So they informed our side of the argument of nothing new, except that they felt that they were right. The advisory part of the meeting related to a simple proposition that took a little time to adumbrate. I invited them—both officials were, I am sure, competent young government lawyers—to take advice on this issue and on the terms of the offence, which we shall turn to shortly, from senior Treasury counsel who would be independent and objective as to whether the government views on the strength of the Bill on this point were correct. I do not know whether that has been done. The fact is that the meeting took place but was not productive.

There are times in legislative life when those who see cannot persuade the blind where they are going. In Amendment 30 no attempt is made to disadvantage junior staff and every attempt is made to ensure that senior staff are not allowed to use the fault of junior staff as an excuse for their own responsibility. That is what that amendment is plainly directed at. It makes the senior management’s job crystal clear. It is necessary to consider what the Minister has said in reply and, for the moment, I beg leave to withdraw the amendment.

Amendment 26 withdrawn.