Criminal Finances Bill

Lord Hodgson of Astley Abbotts Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

[Lord Beith (LD)]

My Lords, my noble friend has explained with magnificent clarity the purpose and nature of her two amendments. However, in discussions that I have had with her, she has still not quite convinced me that the use of a statutory instrument to create further facilitation crimes is something that I ought to be enthusiastic about. I well understand the purpose that she is pursuing and the care with which Amendment 161 incorporates various safeguards both within its own text and by reference to other legislative provisions. My concerns are not raised by Amendment 163, which she offers as an option.

As your Lordships look further at this matter, I just hope that we can focus a little attention on the fact that, if anything is created as a crime by a statutory instrument, it is done by a process which, although affirmative in terms of the amendment, is not capable of amendment. Therefore, any defect in the way it is worded or presented can only result in either it going through in a faulty way or the Government accepting that they should withdraw the amendment and come back with a better one. I wish that they would do that more often and quite quickly, because it would resolve some of the problems that we have with statutory instrument procedure. However, I listened to that part of the debate with still unresolved anxiety about the use of a statutory instrument without further qualification.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I think it is worth making two points. I understand the point that the noble Baroness, Lady Bowles, was making and the importance of the topic that she has raised. It is quite a serious matter to introduce a change of this nature by a statutory instrument—an issue that has concerned your Lordships’ House in the past. I understand that the noble Baroness has drafted her amendment to try to avoid some of the worst excesses but it is something which—with Henry VIII powers and so on—we are very concerned about. Widening this provision through a statutory instrument could lead to some difficulties regarding the appropriate level of parliamentary scrutiny, given that statutory instruments are, by definition, not amendable.

My second point relates to Amendment 166 in the name of the noble Lord, Lord Rosser. I always support him when he wishes to do post-legislative scrutiny. I think that part of what he is getting at here is that we should look at whether all the holes have been blocked up. However, to do so within six months of the day on which the Act is passed will not give much time to see how the new legislative provisions are bedding down. Therefore, from my point of view, it would be more appropriate if a longer time was allowed during which the serious impact of the Act would, I hope, make itself felt.

--- Later in debate ---

[Baroness Butler-Sloss]

My Lords, as vice-chairman of the All-Party Parliamentary Group on Gibraltar I am grateful to the noble Baroness, Lady Stern, for having noticed that I was here and expressly excluded Gibraltar from Amendment 167. It is possible, however, that the omission of Gibraltar might be misunderstood; consequently I want to put on record Gibraltar’s position on its financial affairs. It is compliant with all the financial requirements. The OECD, in its phase 2 review of Gibraltar, ranks it equal with the United Kingdom and the United States on transparency, effectiveness and exchange of information.

Gibraltar, as we know from earlier discussions in this House, is the only overseas territory within the European Union at the moment. It continues to be bound by EU law for at least the next two years and is transposing the fourth anti-money laundering directive by June of this year. That includes the creation of a central register of beneficial ownership, which points out that Gibraltar is doing well as a financial centre and is compliant.

[Lord Hodgson of Astley Abbotts]

My Lords, the theme of corruption and the damage it does to society has been the thread running through all our debates this afternoon and, indeed, on our first day in Committee last week. When you have powerful speeches from the noble Baronesses, Lady Stern and Lady Meacher, the right reverend Prelate the Bishop of Peterborough and my noble friend Lord Kirkhope, you have to be influenced by what they are telling you. When they link it to the idea of a gold standard of a publicly available register—although after the noble Lord, Lord Eatwell, had finished with Companies House, gold was no longer the metal that I would associate with that institution—you feel that there may be an exceptionally strong case. Equally, as you reflect on it, you begin to wonder whether the best may not become the enemy of the good.

In trying to clarify my thinking on this very difficult issue, I ask my noble friend on the Front Bench to focus in her reply on three points that are important to me. They relate to the big three of the overseas territories mentioned in the amendment: Bermuda, the British Virgin Islands and the Cayman Islands. The others are much smaller; they may be important in the future but the major difficulties will arise with the first three.

First, can my noble friend confirm what the noble Lord, Lord Beith, said—that those three territories are going to have an up-to-date register of company ownership—and the date by which it is going to be in place? If it is going to be in place, are the Government satisfied that each register operates effectively and accurately?

Secondly, I come to the verification point raised by the noble Lords, Lord Eatwell and Lord Naseby. Since information is put into these registers by third parties, which have titles such as corporate service providers—CSPs—trust or company service providers, and so forth, are the UK Government satisfied that the regulatory regime in each of these territories ensures that the CSPs operate to timely and accurate standards? Are there adequate checks on their performance? For example, are there, as we have in the City of London, fit and proper person tests to make sure that those who are providing the information have decent standards of behaviour imposed on them?

Thirdly and finally, as my noble friend Lord Kirkhope said, are UK law enforcement agencies satisfied with the level of co-operation and assistance provided by these regulatory authorities? Do they get prompt and helpful responses or are the responses dilatory and evasive? If my noble friend was to say that she could give the Committee assurances on those points, my concerns about the best being the enemy of the good would rise in significance. Of course we are seeking a gold standard but surely in the short term what is vital is not that I or other Members of your Lordships’ House should be able to interrogate the register but that the relevant law enforcement agencies should be able to do so, and should be able to do so promptly and to get information promptly. Then, I hope, as enforcement standards rise and, as my noble friend Lord Naseby said, the United States begins to bring all parts of its dominion into proper behaviour, the gold standard of full public disclosure may well be appropriate.

I quite understand why the noble Baroness wishes to do this but my concern is that if we go too far, too fast now, the malfeasant—and it will be those who go first—will drift away to still murkier regimes. We may have only half a loaf and the noble Baroness would like the full loaf, but at least we have half a loaf. If we go to murkier regimes, there will be no way of getting any sort of collaboration, co-operation or help at all to tackle what I think everybody in your Lordships’ House agrees is a really important problem and is imposing terrific damage and harm on our fellow citizens, particularly in the developing world.

I hope my noble friend can answer my questions. Are there going to be prompt and accurate registers in the major territories—and, if so, by when—or are they there now? Are those who upload information into the registers properly checked, verified and regulated? Do our law enforcement agencies really get wholehearted collaboration and assistance from their opposite numbers in those three territories?

[Baroness Kramer]

My Lords, I am a signatory to Amendment 167, which was moved so eloquently by the noble Baroness, Lady Stern. I have signed that amendment because I struggle to see any effective way forward other than a route that essentially follows the lines that she outlined.

In this House, I think that every Member is utterly dismayed by the level of corruption in many countries across the globe, particularly those with some of the poorest and weakest populations. But there are also kleptocracies with sophisticated developed populations which do huge damage to their countries and to international affairs. If we look at the strife that drives people to become refugees and migrate across borders, on a scale that we have hardly seen in the past, there are criminal groups which manage themselves so effectively. All of those groups are enabled—indeed, can survive—only because they can find a portal with which to interface with the legitimate financial services community.

The work we are trying to do with these amendments is to close down those portals because the impact of that would be phenomenal, and not just for developing countries. It would have a great impact on the developing world and potentially on us. There is almost nothing we could do that would have more impact in bringing peace, opportunity and prosperity across the globe. This takes great courage, but it is also a great prize.

On the argument being made today, first, I congratulate many of the countries which have moved forward, for example to establish central registers. Work is being done in the overseas territories—I know it is true in the Crown dependencies as well but I understand their different constitutional position, which is why they are not included in Amendment 167—to establish a powerful relationship with UK enforcement authorities. If that were sufficient to close down those portals to the people who we know should not be able to use them, I would be happy to stop at that point. But I have found no one who believes it is true that enforcement authorities would be able to act through those central registries in ways sufficient to close down the routes and effectively shut out so many of the people who we think should be shut out from the legitimate financial world.

The only route I can see to make this reasonably or wholly effective is transparency. I fully accept that transparency at the global level is the obvious ideal, but I am a realist. I do not think anybody in this House believes that a global standard of transparency, with public access to central registers, will be available in my lifetime—and probably not in my children’s lifetime. Achieving that global standard is near impossible, so how do we move forward and at least create the reality that more and more portals will be closed down to those who try to use them? I was proud of this country when it took a very strong and difficult position to lead not only on central registers, for example, but on transparency. It said that if nobody takes the lead and moves out in advance, the rest will never follow. There is no basis if one waits for everybody to move together. We still face that situation.

I have met with representatives of the BVI and Bermuda and I hear the case presented for the Cayman Islands, and others such as Jersey and Gibraltar. I fully understand that every country on our list, even those that think they are touched by the underlying principle of the amendment, are quite offended. They feel that they are reputable places which have done a great deal to make progress on the elimination of corrupt practices. I understand their sensitivity on that issue, but the problem with which we are dealing is so much bigger.