Criminal Finances Bill — House of Lords, 2017-03-28
Topic: Law and Crime
Robin Granville Hodgson (Conservative, Centre-right): My Lords, I have Amendments 126 and 127 in this group. They impose duties on the National Crime Agency regarding the performance of its duties and the way it supervises the bodies that report to it. I tabled the amendments to address my concern that the country’s anti-money laundering regulations, which were and remain a critical part of the fight against financial crime, are not as effective as they should or could be There are three related issues. The first is that the regulations lack focus. Far too much unnecessary information is collected, which serves to distract rather than to illuminate the task of the regulator. We have heard tonight from my noble friends Lord Deben and Lord Leigh, and every Member of your Lordships’ House could produce evidence of the collection of superfluous information. They also lack effectiveness and follow-through. I was astonished to read in the debate on Second Reading in the House of Commons that Sir Edward Garnier, experienced lawyer that he is, said that many certification orders, having been granted, are never enforced. I therefore put down a Parliamentary Question—which is due for answer the day after tomorrow, sadly, but I am sure that my noble friend can chase up her officials—in which I asked, "in each of the last three years for which figures are available, how many confiscation orders were … authorised by the courts … put into effect; and how much money was recovered" I hope that my noble friend will be able to give us those figures when she winds up However, it is not just about confiscation orders. My noble friend Lord Faulks talked about the report in the Times last week, according to which between 2007—when we introduced the last set of money-laundering regulations—and 2012, there were no convictions at all: "There have been four convictions since and five more proceedings, according to a freedom of information request by the London law firm Howard Kennedy" Of course, as I said at Second Reading, the asset recovery by the NCA can only be described as trivial: £26.9 million for an agency that costs some half a billion pounds to run, and which tells us that billions of pounds of illegal money passes through London every year Lastly, and most importantly, the regulations do not enjoy general public confidence. Too many members of the public regard them as a paper-pushing exercise. As a result, they do not feel committed to their success or to ensuring that they work well. In my experience, having from time to time chaired risk and compliance committees, attempts to get the regulators to explain how valuable their work is are not greeted with great approval; they tend to say, "This is our business—you mind yours". That is very different from the approach of the security services, which have publicly praised the public for their help At that point, some people may be tempted to say, "He works in the City, so he is a tainted witness". However, I was interested to read the briefing from Transparency International—an NGO about which I know very little. It said: "At the heart of the problem is the fact that", there are, "27 Supervisory Bodies in relevant sectors … This leads to a fragmented approach: ...Failure to identify where the risks are and mitigate against those risks…The approach to enforcement is inconsistent and not transparent or effective…Many of the supervisors have serious conflicts of interest"— we have already discussed that this evening— "which we believe prohibits the bodies from doing a good job" I could hardly have put it better myself Compliance remains the great growth industry. Noel Coward may have said to Mrs Worthington, "Don’t put your daughter on the stage", but you could do a great deal worse than putting her into compliance. Regulators seek more powers, so more returns are needed, compliance officers see a chance to build their empires, professional firms seek commercial opportunities in checking and rechecking the records, and Ministers can attend conferences and refer to all the efforts being made and the money being spent While the money being spent is considerable, both directly in maintaining the supervisory bodies, and by the firms who have to comply with their requirements, there is another cost which is much less frequently referred to: reputational cost, which arises from a process known as "de-risking". When you de-risk, you remove from a group of people or a set of companies their financial ability to transact. Noble Lords will be aware of my interest in the charity and voluntary sector. Charities which operate in "difficult"—sensitive—areas find it almost impossible to get the financial services of British banks; it is not worth their time or trouble. It is not about borrowing money but just checking facilities—day-to-day operations—and the smaller the charity, the more difficult they find it. It affects not just organisations but individuals as well. Thirty years ago I worked in the City with a Pakistani who has a British passport and who is as Anglophile as you would like him to be. He worked in Hong Kong, and now lives in Lahore. He has just been told that all his bank accounts have been closed. Is there anything wrong with the accounts? There is nothing wrong with them—it has just been done. It is clear that the pressure on the banks to close down these accounts is coming from the regulators.