Scrutiny of Secondary Legislation — House of Lords, 2017-11-06
Topic: Mixed Topics
Sharon Bowles (Liberal Democrats, Centre to centre-left): My Lords, by chance this Motion is being debated on the same day that we have had the Urgent Question on the paradise papers. I would like to make a couple of short points before I get on to the main issues of timing. Seeing the paradise papers means that we cannot avoid having many more debates on tax avoidance and money laundering. It shows yet again that more has to be done on the transparency of British overseas dependencies and territories. I would like to point to an extract I have seen from the Government in the context of money laundering, which comes from the Companies House annual report 2014-15 and says that the, "benefit in having an open, and up to date, register means that it has ‘many eyes’ checking the information … The more open the data is, and the more it is viewed, trust and transparency will increase" That says it all about closed registers Turning to the Motion, I am not a member of the Secondary Legislation Scrutiny Committee, and am not yet an expert in the intricacies of how secondary legislation is scrutinised here, but I was quite expert at dealing with, and changing, comparable processes in the EU. I find myself asking why the Government organised themselves to make this regulation just in time for transposition so that there was then no breathing space to permit proper parliamentary scrutiny when a general election was called. Time did not have to be so tight, but I fear that it is part of a pattern of seeing scrutiny of secondary legislation as a mere fig leaf for due process The fourth money laundering directive was completed some time ago. All but the final trialogues were completed when still under my remit as chair of the Economic and Monetary Affairs Committee of the European Parliament. It was not a difficult directive. It closely followed the Financial Action Task Force recommendations that came out in 2012. Despite being slowed down by the election of a new European Parliament, the summer break, and the palaver of appointing a new Commission, it was done and dusted, translated and published by June 2015, setting two years for transposition What filled those two years? It took 15 months to get a first consultation out. The consultation was not opened until 15 September 2016 and closed eight weeks later on 10 November. There were a total of 186 responses to that consultation. I have not tracked down a breakdown, but that number covers all the responses from supervisors and other Government departments, as well as from NGOs and industry. It is not a huge number. Unfortunately, I have not managed to find publications of the actual submissions, but have seen a summary in the following consultation By then, the timing problem had been created, but there was a follow-up with a second consultation and draft regulation after another four months; it opened on 15 March 2017 and closed on 12 April 2017. The regulation would have got to a touchdown only just in time even if an election had not been called. That first 15-month delay is unacceptable, because it was scheduled in that Parliament would be given minimum time and scheduled in that there was no contemplation of a vote against, because there would not have been time for changes even without an election. I cannot find any excuse in the subject matter for delay. It is frequently iterated that the UK is a leader in FATF. Back in 2012, it was known what the provisions were and where flexibility lay. If the Government are so keen to say that they lead the field by example, which by all means they should as host to a centre of global financial services, why were they pushing up against the deadline I know that amendments by way of the so-called fifth money laundering directive were soon under way. It might have been convenient to delay and try to do this at the same time as transposing the fourth directive. That does not seem appropriate, but if that were a reason for delay it means that convenience was given priority over parliamentary scrutiny. The European supervisory authorities managed to complete their consultation and guidance by November 2016, even though it is guidance for supervisors that they do not have to follow until June 2018. However, it helps with how to deal with risk assessment, and has already been referenced in the consultation that the FCA has launched. There is a problem in and around how you deal with assessing risk. In that regard, the Government possibly did their best by publishing the annex of factors from the directive in the regulation. However, a lot of businesses will have been left dangling, and wondering what they are going to do.