New Clause 27 - Money laundering offences: electronic money institutions, payment institutions and deposit-taking bodies

Part of Financial Services Bill – in the House of Commons at 4:45 pm on 13th January 2021.

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Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington 4:45 pm, 13th January 2021

From the speeches of the previous two speakers, we can see that there is a thread running through the bulk of the amendments. It is that no matter how significant the contribution of our financial services to our economy, the widespread concerns about the probity of their operations should not be ignored.

New clause 1 standing in my name and the names of other hon. Friends would require the Government to publish a report; to come clean about the standard, conduct and ethics of businesses in the financial services; and to assess publicly the prevalence of unlawful practices such as tax evasion and money laundering and the prevalence of charging excess fees, tax avoidance and providing inadequate advice to consumers. New clause 1 would require the Government to consider and report on the case for a public inquiry and any plans for further reform of regulation.

The FCA plays a core role in the regulatory structure, and in this Bill it is gaining even greater powers. The appointment of the FCA chief is critically important therefore in determining the effectiveness of our whole regulatory system. For that reason, amendment 3 in my name would ensure that before the appointment of a new chief executive, the Treasury would publish a report on the FCA’s effectiveness under the outgoing chief executive. That would allow lessons to be learned. Amendment 4 would give some teeth to parliamentary scrutiny of the FCA by making the appointment of the chief executive subject to approval by the Treasury Committee.

If Members have any doubts about the need for regulatory reform, I recommend a swift read through the litany of recent reports of scandals, highlighting the FCA’s shortcomings and how it has been asleep at the wheel. London Capital & Finance was a large-scale Ponzi scheme. Connaught Income Fund was ripping off consumers. The notorious Woodford Equity Income Fund was milking investors. RBS has been forcing companies into administration in order to seize their assets.

Many Members have dealt with constituents who have been the victim of these scandals and who have lost their livelihoods, their savings and pensions, their firms, their homes and, in some tragic instances, their lives through stress or suicide. As has been mentioned, the US Financial Crimes Enforcement Network now assesses the UK as a “higher risk jurisdiction”, and that is based upon the number of UK companies appearing in suspicious activity reports. I share the view of other Members who have spoken today. The Government should not be complacent on this matter. It is time to start cleaning up the stables.

I have also tabled new clause 2 on debt. Due to the covid pandemic, the number of households in severe problem debt has doubled to 1.2 million. It is estimated that 800,000 households are behind on their rent. New clause 2 simply asks the Government to bring forward to this House, within six months of this Bill becoming an Act, a report assessing the scale of the debt problem, the effectiveness of current mechanisms and the potential for additional mechanisms and policies.

To be helpful, let me put a few ideas to the Government. Some of these issues with debt have been caused by the Government themselves, so I urge them to scrap the benefit cap, the two-child limit and the bedroom tax, to introduce a real living wage of £10 an hour and to abandon their proposals for a public sector pay freeze.

The Treasury Minister will also be aware that the Bank of England base rate is currently just 0.1%. That is not the rate for many consumers, who are paying 25% interest on credit card debt, or payday lenders, who can charge up to 0.8% a day, nearly 3,000 times the Bank of England base rate. It is time the Government brought forward legislation to curtail these appalling interest rates. When debt was a problem for the banks in the 2008 crisis, the Government intervened to lift the burden of bad debts. It was good enough for the banks, so I suggest that the Government examine the work of Johnna Montgomery, who is calling for a similar long-term refinancing scheme now to lift the debt burden from our hard-hit constituents. They need the Government to act to lift them out of potential poverty and penury now.