Sanctions and Anti-Money Laundering Bill [HL]

Lord Patten Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 6th December 2017 Lords Chamber

I drafted the amendments to show what a slightly more predictable outcome might look like in conjunction with the money laundering regulations. I beg to move.

[Lord Patten (Con)]

My Lords, rising for the second time during Committee, I remind the Committee, as on the previous occasion, that I have interests in the financial services world. Having declared that, I must also declare that I love the new concept that the noble Baroness, Lady Bowles, has introduced of not a probing amendment but a “probing probing amendment”, which is exactly what Hansard will, now that I have repeated it, have to record tomorrow for posterity. This will go down over the centuries and may be multiplied in many more ways.

I am fascinated by the point that she made about the read across from EU directives, but I rise to make a “probing speech”—I am more modest—about whether we need to take account in our discussion in Committee today of the announcement that the EU made only yesterday, 5 December, when the Economics Commissioner for the first time blacklisted 17 countries for money laundering. This is the first time that the EU has ever done this. It included Barbados and Grenada. It also grey listed—that is, put on watch—a whole load more, including British territories such as the Isle of Man, Jersey, Guernsey, Bermuda and the Cayman Islands, for possible money laundering. Do we need to consider this? It is a listing, not a directive, but it is linked to what the EU specifically called “aggressive tax avoidance”, which is what we are very concerned about and do not want to see.

This is the first time that the European Union has gone into this issue. Commissioner Moscovici has urged all members to continue to agree on “dissuasive national sanctions”—believe me, Hansard, those are the words he used: “dissuasive national sanctions”. I thought that we had long ago done just this, in this country and in other international fora, when we produced endless lists of countries that should or should not be under the cosh of being blacklisted or grey listed. Do we need any more of this? Were we involved with the EU in discussing whether there should be blacklisting or “grey” listing of the countries? Did we try to dissuade it from going around the same old course again and making it very much more complicated in this first, highly immature step into such listings?

My probing question is: do we approve of what the EU has done? My second probing question is: does it relate to the Bill in any way, and should we be concerned with it, because I strongly support the Bill?

[Baroness Kramer]

My Lords, the noble Lord, Lord Patten, may be very interested in the next group of amendments, given the theme that he has just raised. He may have raised it because he cannot remain for that group, but if he has the opportunity, he will get a thorough response to the questions that he has just raised—possibly not from the Government, but certainly from other Benches.

I rise to explain the origin of this particular amendment. This came as a consequence again from the meetings that the Minister very kindly was able to offer to discuss the content of the Bill. The Minister will be aware of how strongly I feel about the importance of keeping the democratic process embedded in creating anti-money laundering legislation by essentially taking those powers that are undertaken by the European Parliament and the Council and transferring them to this Parliament, rather than to government Ministers and executive control. That is the underlying issue that essentially faces this Bill, and we discussed some of that earlier.

When we were in that discussion and proposed something very simple—the text of Amendment 68A, which took the existing 2017 regulations, put them on to the face of the Bill and then said they could be amended only by primary legislation in order to make sure that that democratic process continued—two primary issues were raised with us. First, it was said that sometimes action would need to be fast-tracked. We took care of that, as your Lordships who were here will remember, under Amendment 69A, which provided a fast-track mechanism for those moments of emergency. However, I notice from the Delegated Powers and Regulatory Reform Committee report that, when it probed to try to find examples of those emergencies, the FCO could not come up with a single one, which the committee was not very impressed by. But let us accept that there are times when there are emergencies—and there certainly is a role that FATF plays—so we made a carve-out for that.

The second issue that was raised with us was that it would be impossible to change in the Bill the language of regulations tied to the European Union and convert it over to a UK equivalent—that was almost too impossible for anybody who was sitting there drafting the Bill even to contemplate. The noble Baroness, Lady Bowles, who is a fearsome drafter, very rapidly took pen to paper and drafted an amendment which pretty much does that. She accepts that the amendment may not be absolutely perfect, but she does not have the resources or legal staff that the department has available to do the checks and complete conversions. I believe that this particular transposition took about an hour, and I think that anybody on the government Benches would agree that, in terms of making that shift, the amendment probably does 98% to 99% of what is necessary and is in need of only a little refinement.

The amendment makes it clear to the Government, since such a challenge was thrown down, that there is a very simple way—it is a relatively short new clause—to cover what, apparently, was one of the primary obstacles or difficulties for moving through the primary legislation route. This would leave the policy framework and principles in place as part of a democratic process, rather than requiring that all of those be abandoned and we just go to a regulation process on these very fundamental issues.

As my noble friend has said, these provisions can place great burdens on business and—we will come on to this later—can lead to the creation of criminal offences, with imprisonment for up to two years; can define the defences available against prosecution; can put in place new supervisors and change the powers of those supervisors; and can redefine every other piece of legislation that uses the phrase “terrorist financing”, using sweeping wide powers.

I understand the Government would have loved to have been able to do that in primary legislation but could not see a way through and was therefore forced to try and do this through a regulatory mechanism. This amendment is just one of those examples that makes it clear that it can be done, and I hope the Government will take it seriously.

--- Later in debate ---

[Lord Bates]

My noble friend is right, and I am sorry if I have not been very clear on this. The key point was that the stylistic terms “grey list” and “blacklist”, which may be for general convenience, were not reflected in what we were saying—rather, it is a demonstration of commitments by the 30 jurisdictions named to address the concerns of the EU Code of Conduct Group. So we are more discussing the semantics of the terms that might be used to describe a jurisdiction which is complying or not complying, or progressing or not progressing, towards addressing concerns of the Code of Conduct Group.

[Lord Patten]

It is extremely important that we have the terminology right. If I have got it wrong, I apologise to the territories involved. I think—I ask my noble friend to reflect on this—that it is perfectly daft to put a British Overseas Territory such as Bermuda on a list of whatever shade of grey, because I believe that it is a very upright outfit and a suitable, well-run territory for financial services, and I do not believe that it is involved in money laundering. But it has been fingered in reports, and Commissioner Moscovici said yesterday that it was on some sort of grey list. We need a certain amount of clarity, because it is damaging to those people who do business with Bermuda. So I agree with my noble friend.

[Lord Bates]

That is a good point.