Bank of England and Financial Services Bill [Lords]

John Bercow Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 19th April 2016 Commons Chamber

[James Cleverly (Braintree) (Con)]

Does my hon. Friend share my concern that the rush to implement these actions ahead of the directive indicates a desire by the banks to take what seems to be decisive action against a group of people who are quite easy to target, and that the banks will be less keen to take that action against people who are harder to track down? [Interruption.]

[Mr Speaker]

Order. I know the fondness of the right hon. Member for East Yorkshire (Sir Greg Knight) for live music, and it is a fondness that I share, but there are limits.

[Mr Walker]

I thought that rather complemented the intervention from my hon. Friend the Member for Braintree (James Cleverly)—it was almost like an opera singer opening his lungs.

My hon. Friend makes a very good point. Banks need to invest their resources, time and energy in going after high-risk people. Banks know which people are high risk. To be perfectly honest, whatever people in this country think about their Members of Parliament, trade unionists, council officers and leaders, Assembly Members and Members of the Scottish Parliament, they are, in the main, not bad people indulging in money laundering. I am not saying that there will not be a bad apple, but those people do not present the real and current risk. Banks’ energies should be focused not on chasing after the good, but on chasing after the very bad.

The Financial Action Task Force catch-all that says that even middle-ranking people can be involved in money laundering basically puts everyone above grade 7 in the civil service in the frame. Think of people in a Government-backed organisation or trade union regional organisers. If banks follow the FATF guidance, those people could be deemed to be politically exposed persons, so not only their banking facilities, but those of their families and associates, could be withdrawn or curtailed.

I will make some progress, as I was not planning to speak for so long. Once a PEP, always a PEP. Although article 22 of the directive states that after 12 months have passed from the point at which the politically exposed person has left office, a bank can decide that that person is no longer a PEP—that sounds like good news—it goes on to say that banks will

“be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk specific to politically exposed persons.”

That is the lobster pot from which few will escape. Banks are risk averse, so they will feel that it is much better to keep someone as a PEP indefinitely than to take the risk of downgrading them to the status of a normal customer unless they are obliged to do so.

Forget people serving in public life; let us think about those who have left it. Without the protections and guidance in new clause 9, ex-Army officers, ex-judges, ex-trade union representatives, ex-community leaders, volunteers and ex-members of political parties, and former Members of Parliament could be denied the opportunity to serve on charitable and company boards because their presence would confer the status of politically exposed person on the rest of the board. That status is best avoided by individuals who are not yet stigmatised. If conferred, such a status could lead to a withdrawal of the relevant charity or company’s banking services. This is not supposition and I am not making this up. Along with the restriction of banking services, the closure of personal accounts and the blackballing of family members, it is happening now. In accepting new clause 9, the Government will enshrine in an Act of Parliament that banks have a legal duty to act proportionately and in accordance with FCA guidance, and that is the correct thing to do.