Criminal Finances Bill — House of Lords, 2017-04-25
Topic: Domestic Commerce
Charles Hay (Crossbench, Unknown): My Lords, I declare my interests as set out in the register of the House and, in particular, that I was chief executive of a class 1 major reinsurer in Bermuda for a number of years and have very wide experience of financial services in that country and generally I pay tribute to the Minister and also to the noble Baroness, Lady Stern, in their respective ways. I am afraid that I can pay tribute to the noble Baroness, Lady Stern, but I disagree with her fundamentally. While I feel that the appalling catalogue of problems that she read out is terrible, worrying, vile and awful, Amendment 14 is not a good way of addressing the issue. She challenged me to try to provide a better way, and I will in the course of my remarks People often do not understand how big a jurisdiction Bermuda is. Bermuda overtook London as a centre of reinsurance in 2004. London remains number two in the world. No major insurer in this country would be able to trade without the reinsurance that it purchases from Bermuda. The amount of money, capital and sophistication in Bermuda is enormous. The BMA—the chief regulator there, of which more in a second—is an extremely professional and very tough regulator. Bermuda was not responsible for even one of the revelations in the Panama papers and is a very clean jurisdiction, and it is particularly unfair that it is named in this amendment I have four particular points, on two of which I can be very quick. The first is a general point about interference by Westminster in the affairs of these self-governing regimes. I agree with the Minister, and I will say no more. The second is a general point about shifting the problem to another jurisdiction. I agree that shifting a bad thing is a good thing in many ways, but shifting a good company is a bad thing because you are simply damaging the jurisdiction. There are many good companies, and I will explain in a second why this amendment would have the effect of shifting good companies. It would be very wrong for us to impose damage on our loyal overseas territories and possessions My third point is about the three things that control and look at naughtiness in financial services, which are the tax authorities, the police authorities and the regulators. As a chief executive of a big company, of course one is worried by tax authorities and policemen, but the person who can walk into your office and stop you trading immediately is the regulator. He has the most power, and he is the toughest. I regret that in the many debates we have had the power of regulators has not really been discussed, nor has how sophisticated they are and how close they are to what is going on. It is not possible for one of these shell companies to be set up without a regulator being involved because that company will require a bank account. Banks are heavily regulated. If the shell company does not require a bank account, it will require a fund manager to look after its money. They are very heavily regulated. A person running the support business in a high-integrity environment such as Bermuda would not allow someone —one bad client—to come in and kill off their whole business. They would be very careful to make sure that that does not happen. You are scared of regulators. You are of course scared of tax and police authorities, and you are more than willing to give up any information that will protect your business because no one client is worth it. Your business is your business; your staff are your staff. That is how everyone feels—I hope noble Lords can hear a level of emotion in my voice A sub-point is that in our society we rely on the forces of law enforcement to deal with naughtiness on our behalf. We do not have vigilante posses running around trying to do things. I worry that if everything were publicly available people would suddenly see themselves as being promoted into some sort of enforcement environment. That is wrong. We should leave these things to the professionals—the tax authorities, the police authorities and the regulators—and trust. If they do not do a good enough job, we should bash them. We should not allow vigilante posses I move to my fourth point, which is the most worrying point for me. I have mentioned it to the noble Baroness, Lady Stern. For many years, Hiscox, the group I worked for for so long, looked after the possessions of well-off people all over the world. It is also the leading kidnap and ransom insurer throughout the world. During my time at Hiscox, we logged 40,000 man days of kidnap problems around the world. Hiscox’s market share was more than 50%, so it understood the issues. In this country, we are very lucky to live in an environment where we are safe and secure. I will walk home tonight and think nothing of it. I can get into a smart car and think nothing of it. That is not the case in countries such as Mexico. In Mexico, you cannot keep your company with a local bank or keep your money there. In quite a lot of countries, you need to go to offshore environments, and you are a good client because you have earned your money. Hiscox’s perfect client was someone who owned a beer factory in Mexico or something because it knew they were straight and honest and could see how they had made their money. People were very scared. Part of kidnap and ransom is advising clients. Hiscox advised them to keep quiet about it and to be discreet. That is the chief weapon that will stop nastiness going on. When the nastiness happens, it happens not to the guy running the beer factory but to his daughter. It happens in a nasty way. I worry that the effect of this sort of thinking, without a proper impact assessment being sorted out and thought about very carefully, could be that we would be sentencing some people who have made their money honestly to physical harm and the invasion of their homes I finish by saying that of course I do not want any of this naughtiness to go on, but I feel strongly that Amendment 14 is not the way to go about it. We should rely on the police, the tax authorities and the regulators to do it for us. We should look very carefully at their performance in all of these countries and carry on, as the Government have been doing so successfully, getting incremental improvement. This House should make sure we carry on pushing the Government to push the authorities to get that incremental improvement. But I plead with the House not to support Amendment 14.