Financial Services Bill

Lord Hendy Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Hendy (Lab) [V]]

My Lords, I add my congratulations to the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I agree with my noble friend Lord Sikka and other noble Lords who have pointed out that the Bill does not go far enough to secure proper governance, financial integrity and measures against corruption. The current state of the law is a blot on the finance industry in the United Kingdom, which has seen outrageous criminal conduct on a massive scale go unpunished and sometimes uninvestigated. I am speaking of money laundering, fraud, false accounting and the like. I have in mind the collapse of BCCI, the Libor scandal, HSBC’s money laundering and other cases referred to by noble Lords. The case for a public inquiry into the finance industry is now incontrovertible.

A particular problem has been the current state of UK corporate liability law, the “directing mind” test, which effectively puts large companies and financial institutions beyond the reach of criminal prosecutors for many economic crimes other than bribery and tax evasion. The charities Finance Innovation Lab and Spotlight on Corruption have highlighted this in briefings, and I am grateful for their elucidation of the problem and their proposed solution.

This is a rule of law issue. An amendment to the Bill is needed to make it a criminal offence to facilitate an economic crime or to fail to take reasonable, necessary steps to prevent an economic crime. Individuals should be personally liable, and so should corporate entities in a sufficient relationship with a guilty individual to found vicarious liability under the ordinary principles of the common law. This would be a straightforward yet vital step to bring fraud, money laundering and false accounting into line with bribery and tax evasion. It would bring the UK into line with equivalent laws which exist and are used, sometimes with spectacular results, in the United States and the EU. Given the well-reported increase in fraud cases during the current pandemic, this is an urgent matter.

By the same token, since Brexit and the failure to secure any deal in relation to financial services, the need to restore the reputation of the finance industry and highlight its effective regulation by passing such an amendment is particularly pressing. It is understood that the Law Commission is currently reviewing corporate crime, but this Bill presents an unmissable opportunity now to create such an offence, and I hope the Minister will be able to tell us an amendment on these lines will be introduced.