Sanctions and Anti-Money Laundering Bill [HL]

Lord James of Blackheath Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

[Lord James of Blackheath (Con)]

My Lords, my contribution to these proceedings will be to present my memories of two money-laundering activities that took place and see how they compare with what might happen today if they had to contend with the presence of this enacted Bill.

The first case emanates from the northern shores of Africa and the other one relates to our old friends the IRA. They are very different, and I shall take the Libyan incident first, which is astonishing in its own way. President Gaddafi had decided that he had to get rid of this terrible capitalist symbol known as Coca-Cola. Coca-Cola had to be driven from the shores of Libya, but he did not have another drink to replace it, and Libya is a very hot country and you have to have a drink.

He approached a company in Yorkshire which specialises in turnkey operations and said, “Please invent me a cola company”. Unfortunately, and unbeknown to them at that time, I was about to be made chairman of this company because the bankers were frightened about how much its borrowings were rising. I arrived on the day when the cola had apparently been created to replace Coca-Cola. Coca-Cola had been sent from the shores of Tripoli with the blasts of cannons echoing in their ears—he got planes to shoot at the ship as it went out to sea, carrying all the residual Coca-Cola of Libya—and the new cola was born.

Unfortunately, the headline in the national press the next morning, on the launch of this new cola—I am awfully sorry but I am going to use a very non-parliamentary word; apologies to Hansard and to the Chair—was, “Kitty Kola is Kitty Cat Piss”. I thought, “This is terrible—if this is what Mr Gaddafi thinks, he will never pay the invoice”. So I said, “How are we going to get paid for it? How much do they owe us?”. They said, “£27 million, sir”. I had only been there since Monday and this was the Tuesday. I said, “We’re not going to get paid, are we?”. They said, “Yes, we will—you wait and see”.

Later that day, they came to me and said, “We’ve been paid”. I said, “Let me see”, and they showed me a credit transfer for £29 million. I said, “That’s £2 million too much”. They said, “Yes”. I said, “Send it back immediately and just keep the £27 million”. “Don’t be a fool”, they said, “You’re a new chairman and you don’t know what’s going on”. I said, “I certainly don’t. What’s the £2 million for?”. They said, “You’ll be told later today”. I said, “I can hardly wait.”

Shortly after that, I got a communication from Libya saying, “Please take the £2 million and open a bank account for us in Rome, and provide us with all the bank details—and by the way, we’ve sent you a picture of the passport of the individual whose name we need to have on the account”. I said, “We’re not doing this, are we?”. They said, “If you don’t do it, we’ll never get another deal in Libya”. I said, “Have you done this before?”. They said, “Yes”. I said, “How many times?”. They said, “Seven times”. I said, “You’ve opened seven bank accounts? For how much?”. “Well, it’s usually about £2 million each time”. “And what’s that money being used for?”. They said, “We don’t know—it’s none of our business”. I said, “It jolly well is. We’re going to have to talk to the security staff about this, straight away”. They said, “You can’t—they’ll blow us away”.

So I got on to the security people and said, “Are you interested in this?”. They said, “Yes. Come and have breakfast and bring all the stuff with you”. So the next morning—they always do it nicely—I got breakfast at the Dorchester, which is never to be complained about, and I took all the files on this thing. They said, “This is wonderful! This is like gold dust.” I said, “I think it’s terrible”. “No, no, no—don’t stop doing it; just give us all the details and then we’ll have the whole thing completely under supervision”. I said, “This is going to be used for buying armaments to murder the Pope and everything else”. “We’ll look after that; you just do what they’re telling you, give us the details and we’ll all be happy”.

The present Bill makes everything that I have just told noble Lords very illegal. But I ask the Minister: how are we going to catch it, because I cannot see that there is any regulatory process or overview that will stop it happening again? And do we think it is not happening today? The company that I was chairman of for that brief period is not there today—but somebody is and they will be doing the same. How are you going to make this Bill work to stop that happening again? I bet it is happening today, and will happen tomorrow and the next day. I would not like to know how many private bank accounts are opened up which provide easy access for Islamic terrorist intervention across the shores of the southern Mediterranean.

I have a conundrum for your Lordships. I will mention five different types of company and I want noble Lords to tell me if they can see instantly why it was attractive to the IRA to acquire a controlling interest in five small listed companies trading individually on the London Stock Exchange. They were as follows: one, the world’s biggest library of photographs available for press utilisation; two, a spoil reclamation company, taking salvage spoil from mining tips; three, the building of a residential village on the shores of Portugal; four, a technical film services company; and five, an extremely upmarket and very posh limousine service working round the airports of Europe. What was the possible interest in having those five companies? I have asked around and only one Member of the Lords got the answer: my noble friend Lord Holmes of Richmond—it took him about seven seconds. I think that he should be put in charge of intellectual investigations of all suspicious work immediately.

The answer, quite clearly, is that every one of them performs a service abroad for which an invoice for payment can be provided from Ireland. It is an easy way of transferring money wherever you want it, in small or big sums, and having the money—criminally acquired funds by the IRA in Ireland—filtered away into little bits and pieces. The village in Portugal is funny, I think, because it was intended to be the holiday venue and retirement homes for retired successful IRA operatives. I did not know that it had such care for the welfare of its people. It makes one feel proud to know that the IRA was so responsible.

The film technical services company was the one that caused the greatest problem. There was in those days—this is the terribly important difference from what we have now—a hugely active corporate governance department in the Bank of England. It was run by a man called Jonathan Charkham who, among his many other great distinctions, was the father of my noble friend Lady Shackleton of Belgravia. Jonathan Charkham was the witchfinder general for the IRA’s activities in the 1980s and he was brilliant at it. He sadly died some years ago. The department in the Bank of England had ferreted away and had found a very strange set of circumstances. An American company that it could not identify had worked through Savory Milne, the broking arm of the Swiss Bank Corporation, to acquire the controlling interest of a company called Eagle Trust and had then used Eagle Trust to float a rights issue to acquire a tiny little film services company called the Samuelson Group for £55 million. The Bank of England decided that something was really wrong because the £55 million, which had been used for the rights issue, was stolen completely. The IRA took that as its up-front money.

Again, I was put in to sort this one out. Jonathan Charkham went in one day and called the board. He had the right—as the backbone of the Bank of England—to call a board meeting which he could attend, sitting beside the chairman of any public company. He sat with this lot, went through the whole thing and then fired the whole board on one day. He then put me in as chairman and I had the night to get together a new board for the next day. We looked at this and it was just a nightmare. Eventually, we found that money had indeed been stolen and, later on that same day, there arrived some very strange Americans from a company in New York who announced that they were the new owners of Eagle Trust. The IRA had been in collusion with Cosa Nostra—I do not how this Bill would cope with that if we get it again. The IRA was using foreign money to buy up a company that it wanted to steal some money from. I am not sure that this Bill gets anywhere near providing a regulatory network to get into that. The difference as I see it between then and now—I know I am talking about 25 or 30 years—is that, whereas then we had the regulatory people and professionals who could act on and work with this sort of thing, nowadays we rely upon the FCA and conventional police forces; the security arm will only act if there is a specific security leak recognised with it. We do not have anything like the old Bank of England corporate governance arm which did so much wonderful work to watch what was happening and move on it. Without that, I cannot see how the Bill will have teeth.

A funny thing about the acquisition of the Samuelson Group was that when we went through the accounts, we found that the IRA had ticked off items and had written down, “Four funerals, £500,000”. We wondered what the IRA wanted with four funerals for £500,000. It turned out that this was code for the film “Four Weddings and A Funeral”, which it had spent all the money producing. The IRA had worked for a year for no fees, which had caused it to go bust, in return for 65% of the revenue from the film, which was an enormous amount of money—so we turn from a £4 million a year loss to £14 million a year profit. The flotation raised nearly half a billion pounds and all the banks were paid back with all the money from that. The IRA lost the lot—which I have to say is one of the most satisfactory things I could ever record.

As I say, I cannot see that the Bill will have teeth. There are no foot soldiers to back it up, and we need them. If the Bill is to work, we need to get the Bank of England to decide whether it will reactivate corporate governance as one of its arms. Are we going to make the FCA do its proper job for once and get on with supervising these things, or will it be the security services more generally? At the moment, it is not there and it will not happen—and unless we get it, this well-meaning Bill will not work. It did work before—we cleared the decks and we do not want them to get cluttered with these dreadful people again. We need to make something to back this Bill.