Financial Crime: Legislation

Lord Hannay of Chiswick Excerpts

Thursday 17th March 2011 Lords Chamber

[Lord Hannay of Chiswick]

My Lords, the subject of today’s debate is extremely topical, as was revealed by the rather unsatisfactory exchange in this House following an Oral Question I asked on 2 March about the regrettable and unjustifiable delay in the entry into force of the Bribery Act. I therefore congratulate the noble Baroness, Lady Williams of Crosby, on now providing an opportunity for us to go into these issues in greater depth. It is also an opportunity, I hope, for the Minister, when he replies to the debate, to update us on developments since that exchange and on the prospects for early progress on bringing the Bribery Act into effect. I shall focus my remarks, on the one hand, on that issue of bribery and corruption and, on the other, on money laundering, leaving the issue of tax avoidance to others who know more about it than I do.

There can surely be no doubt that bribery and corruption are rife the world over, but particularly so in countries with autocratic or weak systems of governance where the rule of law is either entirely absent or at least inadequate. Nor, I think, can it be doubted that bribery and corruption in developing countries levy a heavy toll on their economies, hampering their development and often meaning that foreign aid does not reach the intended recipients. Moreover, in the long run, it feeds instability and disorder, as we have seen recently in Tunisia, Egypt and Libya. This is not something that we cannot afford to tolerate, or dismiss with a weary and cynical shrug, as an inevitable part of the international scene and of doing business in developing countries.

The hard fact is that bribery, as the noble Baroness, Lady Williams, reminded us, requires more than one party and, far too often in the past, one of the parties has been based in a developed country. Hence the move in recent years for industrialised countries collectively to tighten up their laws on bribery and corruption and their implementation. That is welcome but, as others have said, Britain’s record is not very good. We have been operating, and we are still operating, under legislation dating from the 19th century which all recognise as inadequate. Our prosecuting record has been poor too. Hence the urgent need for the new Bribery Act and for a new attitude towards bringing prosecutions.

The campaign against the Bribery Act, which has been mounted recently in the press, anonymously for the most part, is in my view a disgraceful one, wide of the mark, and against the best interests of British business. It cannot be in the interests of British business that it should be thought, for one moment, that our companies can export successfully only by using such dubious practices, nor that we should be out of line with, and subject to sharp criticism by, our developed-country peers, as we are in the OECD and elsewhere. Business is quite right to insist—here I join the noble Lord, Lord Hodgson—that there must be clear guidelines on the application of the Act, but in my view it should be pushing for those guidelines to emerge sooner, rather than later, not trying to delay them. I very much hope that the Minister will be able to say when that damaging hiatus will be brought to an end.

Until we put our own house in order, we cannot possibly hope to operate effectively in bearing down on bribery and corruption worldwide. Nothing damaged our efforts in that respect more than when the previous Government gave in to pressure and brought a premature end to the investigation of British Aerospace’s contracts with Saudi Arabia. I hope that the Minister can assure the House that this Government will not give way to that sort of pressure. It would be useful to hear how the Government intend to pursue the issue of corruption in the context of our new development aid policy; that is, if and when we get our own house in order. The increases in foreign aid are welcome, but they must be accompanied by a drive against corruption in recipient countries.

It would also be good to hear about the Government’s assessment of the effectiveness of the Extractive Industries Transparency Initiative. Is it contributing to the fight against corruption? What progress is being made in getting more countries and more British companies signed up to it? Is something more needed if the discovery of rich natural resources in developing countries is not to be, as it has been so often in the past, a curse rather than a blessing? Are we looking seriously at making the EITI mandatory, perhaps within an EU context?

Turning to money laundering, some time ago the home affairs sub-committee, which I have the honour to chair, of the EU Select Committee produced a report covering money laundering. We expressed considerable concern that the Financial Action Task Force, of which the Minister has enormous experience and which is the international body that deals with money laundering, was doing so little—nothing in fact—to get to grips with the money laundering aspects of Somali piracy, the increasing sums of money which were being paid to the pirates in ransom. We also expressed even greater concern that some of the money might be getting into the hands of terrorist organisations. The then Government’s response on both points was, I thought, singularly limp. They said that they had “no evidence” that any of the ransom money was reaching terrorist organisations. Two weeks ago, the Times newspaper reported that some of the pirates had done a deal to share the proceeds of their crimes with al-Shabaab, which is undoubtedly a terrorist organisation. So what are the Government doing about that now? What are they doing to galvanise the FATF machinery in following up the serious possibility that those ransoms are now reaching terrorists? Is it really satisfactory that those who put together the ransom money, which is no offence under British law, do not have to file a suspicious activity report when they do so? Is that a satisfactory state of affairs?

Sometimes I feel that the Government—not just this one—are a bit behind the game or are playing catch-up on the burgeoning ingenuity of international criminals and are reluctant to challenge or to change existing practices and our law enforcement machinery so that we achieve an effective response to some of the most daunting criminal challenges of our time. I hope that the Minister can assure us that the sort of approach that I have spoken about is a thing of the past and that the Government will be much more proactive in the future.