Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021

Lord Chidgey Excerpts

Tuesday 27th April 2021 Grand Committee

[Lord Chidgey (LD) [V]]

My Lords, I also thank the Minister for his introduction to this debate. It was very precise and to the point. I declare an interest as a member of the advisory board of Transparency International UK.

The Explanatory Memorandum to the SI makes clear that it is intended to update the provisions of the fourth money laundering directive and the Money Laundering Regulations 2007. A principal policy objective is to update and enhance European legislation in line with international standards on combatting money laundering and terrorist financing. Billions of pounds of suspected proceeds of corruption are laundered through the United Kingdom each year. Money laundering is a key enabler of serious and organised crime. Over 100,000 businesses covered under the regulations are required to know their customers and manage their risks.

The UK Anti-Corruption Coalition believes that in terms of perceived gaps in the Government’s approach, they should bring forward economic crime legislation at the earliest opportunity to implement the reforms, together with the foreign property register. I understand that the legislation for this is now waiting to be put through Parliament, having originally been committed to be completed and in operation by 2021. Perhaps the Minister could provide us with an update in his reply. There is also a call for legislative reform to the Criminal Finances Act to ensure that loopholes in it exposed by the latest unexplained wealth order judgment are addressed urgently.

There is a sense that too many professional body supervisors have no appetite to enforce the regulations and are riven with conflicts of interest. There is also the concern that the money laundering supervisors do not meet the specific criteria for effective supervision laid out by the Committee on Standards in Public Life in 2016. Overall enforcement of the money laundering regulations appears, at best, to be patchy.

Transparency International points out that the United Kingdom banking sector acts as an entry point into the UK economy, with leaked banking data showing the movement of billions of pounds in criminal and suspicious funds. Analysis revealed that clients at 72 UK banks and branches sent or received over £750 million in suspicious funds, mostly between 2005 and 2015. Clients at just 10 banks were responsible for sending or receiving more than 90% of these funds. These transactions involved more than 3,100 British bank accounts. However, more than £575 million was paid into just five bank accounts. Surely, this is a clear, transparent case of money laundering on a grand scale. When questioned, all these banks insisted they had strict anti-money laundering measures in place.

The United Kingdom’s anti-money laundering supervision system is disjointed, with real issues regarding conflicts of interest, the quality of supervision, and insufficient and inadequate civil sanctions. Will the Government take note and act on Transparency International’s recommendations for reforming the anti-money laundering supervisory regime? I asked that question in an earlier debate. In particular, will they strengthen the ability of supervisors to provide a credible deterrent, protect the independence of anti-money laundering oversight and remove conflicts of interest, remove weaknesses in the supervisory regime, and ensure that police and supervisors pursue breaches of money laundering regulations through prosecution?

Finally, an overhaul of the United Kingdom’s anti-money laundering regime is vital for preventing money laundering and protecting the United Kingdom’s international reputation. Revelations in the latest FinCEN files leaks, including that the US Treasury considers the UK a high-risk jurisdiction, should serve as a wake-up call.