Criminal Finances Bill — House of Lords, 2017-03-09
Topic: Domestic Commerce
Robin Granville Hodgson (Conservative, Centre-right): My Lords, I begin by drawing the House’s attention to my entry in the register of interests of your Lordships’ House It is always a pleasure to follow the noble Baroness, Lady Stern, who, as ever, has introduced an informed and incisive view. Like her, the right reverend Prelate the Bishop of Oxford, who is no longer in his place, had some very valuable things to say about the role of this Bill and its impact on the developing world. In an earlier part of my life, I had a chance to hear a spellbinding lecture by Professor Peter Bauer—later Lord Bauer, a Member of your Lordships’ House. He revolutionised the way the world thought about development economics In that lecture he pointed out that, in his view, the single thing that most held back undeveloped countries in achieving their potential was the prevalence of corruption, and that if you could root it out, many countries that suffered from underdevelopment would move forward quite swiftly. It seems to me that what applies to underdeveloped countries has an application in a developed nation such as ours. That is why I instinctively have sympathy with a Bill like the one before us today which has the strategic aim of reducing criminal activity and corruption. However, I do not believe that that support and sympathy should be slavish. More regulation is not always the answer to every problem because any measure, including measures such as those in the Bill before us, come at a cost—a point raised by my noble friend Lord Flight. I refer not just to the cost of establishing the necessary enforcement powers but to the increased costs for those affected by the regulations More worrying for me, however, is that too widespread an approach can include a drag on, or an impeding of, innovation in the development of our financial services. Why is that so important to us in this country? The City of London has become a world financial centre—probably second only to New York in size. Surprisingly, it has achieved this despite being backed by only a medium-sized economy, and the country as a whole has benefited greatly from the City’s success That success has had to be based on innovation and acceptance of new ideas. Bigger economies such as that of the US and, increasingly, China can rely on weight of money and the volume of economic activity to carry them forward. The UK cannot. We have to be nimbler, quicker and more entrepreneurial, and being nimbler, quicker and more entrepreneurial is a concept that can worry regulators. Regulators are, appropriately and rightly, risk averse. They can be concerned that novelty automatically hides malfeasance, and thus they block or slow the development of new ideas and new approaches. However, if novelty becomes a dirty, suspicious word, the City and the country will be the long-term losers To summarise what I see as the dilemma, on the one hand, too low a standard of behaviour damages the City’s reputation and drives business away; on the other hand, an unreasonably high bar drives businesses away because of the costs, problems and time taken to complete transactions, and the unwillingness to adopt new ways of working. That seems to be the delicate balance we have to strike when we look at proposals such as those in this Bill Therefore, as we go to the Committee stage of a Bill whose strategic aims I entirely endorse, the test that I wish to apply is: will what we are proposing encourage good standards of behaviour, or merely mindless compliance whereby forms are filled and boxes ticked I turn to a couple of provisions of the Bill, both of which have already been mentioned, so I shall be very brief. First, I support the proposal of unexplained wealth orders and I thank the Minister for her further explanation in her opening remarks. My noble friend Lord Faulks raised a couple of points about them, and I was interested in receiving the White Collar Crime Centre report, which suggests that the enforcement of UWOs will present challenges. Where state officials and politically exposed persons are concerned—two categories that are particularly in the target zone for UWOs—it will be hard to prosecute because of what the White Collar Crime Centre calls "personal immunity" and "financial immunity". I look forward to hearing in the wind-up or in Committee how those two immunities will work, and whether they will have implications for or impede the way this provision is used. As my noble friend Lord Faulks said, we shall need to look at the Australian and Irish experiences to date. My second question about the Bill concerns the overseas territories. A number of noble Lords, including the noble Lord, Lord Rosser, raised this in his opening comments. We have a particular responsibility in this country. White collar crime is very flexible: it is like a balloon—you squeeze it in one place and the air pops out somewhere else. Therefore, we have to explore our links with our overseas territories and Crown dependencies. I look forward to hearing the views of other people, because I am not sure that we have the situation quite right yet, and the noble Lord, Lord Rosser, obviously has some important points to make about that For the rest of my speech I want to return to the idea that new regulation should be formed to encourage quality behaviour and not mindless compliance. I do so because I firmly believe that it is only by engaging the widest possible range of people in the fight against criminal financing that we can ultimately hope to have a high degree of success. It is interesting to note that when Security Service chiefs talk about their successes, they always emphasise how much they have benefited from the notifications that have come from members of the public I regret to say that I do not think that the authorities responsible for the detection of criminal financing have so far managed to engage the interest and support of the public—particularly those who work in the City—in the same way. Why is this? First, it is because many people believe that the existing regulations, both on money laundering and SARs, gather together a vast mass of data—much of which is irrelevant—which the public believe is then put in a file and never examined. They have no reason to believe the contrary. I hope the Government and the authorities will develop a regime which encourages the use of the precision of a rifle shot, not the blunderbuss approach of a shot-gun. Under that regime, the authorities should connect better with the general public about their objectives and how they are being achieved Secondly, there are concerns among the public about effectiveness and the value for money that the present regime provides. Regulators always seek more powers, usually with more money to enforce them. We need to be careful to ensure that, before more powers are granted, all existing powers are being used effectively. I was interested to note that at Second Reading, Sir Edward Garnier, the Member for Harborough and an experienced lawyer, said: "I have noticed that in the past with confiscation orders. Very often, the courts make an order, and either the order is never put into action or very little of the amount required from the offender is ever recovered".—[Official Report, Commons, 25/10/16; col. 208.] Is this true and, if so, what are the statistics? Is the Minister confident that other existing powers are being fully used Finally, I turn to the point made by the noble Lord, Lord Brown of Eaton-under-Heywood. In 2015-16—the last full year for which figures are available—the National Crime Agency, which cost £478 million to run, seized £26.9 million of assets. Am I alone in feeling that, when billions of pounds are supposed to be passing through the City of London, that is not an adequate performance? There are some 27 different bodies engaged in this, so it would be helpful if, before Committee, the Minister could give noble Lords a little schedule of each body’s costs and asset recovery in the last year for which figures are available. I support the Bill, but we need to make sure we are creating an effective, lean crime-fighting machine and not just adding to the bureaucracy.