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 3:45 pm on 13th January 2021.

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Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury 3:45 pm, 13th January 2021

I am very happy to do that. Indeed, the Bill makes provision to ensure that there is ongoing certainty for financial services—particularly the insurance industry, which is so significant to the Gibraltarian economy.

New clause 20 would require the Government to review the cost of divergence from EU rules. I just do not accept that characterisation. Regulatory regimes are not static. There are a lot of myths around this area of divergence. Rules evolve all the time. Where we make changes to our frameworks as they stand today, those will be guided by our continued commitment to the highest international standards and by what is right for the UK’s complex and highly developed markets, to support our world-class environment for doing business. The Bill is the first part of that journey.

New clause 8 would require the Government essentially to report on the status of the EU’s considerations about UK equivalence. That is an autonomous process for the EU, and therefore that is not something that the Government can agree to do. The Chancellor recently announced a package of equivalence decisions—17 decisions out of the 30 that we had to make for the EU—and I will keep the House updated on the UK’s approach to equivalence, just as I did throughout the transition period.

I turn to new clauses 15 and 16, and amendments 3 and 4, which relate to how the regulators’ actions under the Bill will be scrutinised by Parliament. The UK’s regulators are internationally renowned as leaders in financial services regulation, and the Government believe that it is right that powers to implement often highly complex rules are delegated to the bodies with the appropriate technical expertise.

The FCA is already accountable to the Treasury, Parliament and the public. There is a statutory requirement for the FCA’s annual report and accounts for the financial year to be laid before Parliament by the Treasury, and a requirement to hold an annual public meeting at which the annual report can be discussed. There is currently nothing preventing a Select Committee of either House from reviewing the activities of the FCA at an inquiry, taking evidence, calling witnesses and reporting with recommendations. The Treasury recently published a consultation document on the review into the future regulatory framework for financial services, which seeks to achieve the right split of responsibilities between Parliament, Government and the regulators, now that we have left the EU. That is a significant undertaking that we must get right, and I look forward to continuing to engage with Members as part of that review.

I have spoken at length about a number of topics that are not directly addressed in the Bill. I will now address amendments relating to some of the measures that make up the Bill itself. I have already said that the prudential measures contain accountability frameworks, and I will begin by addressing a number of amendments that seek to add additional elements to that framework. As I said to the Public Bill Committee, amendments 1 and 2, along with amendments 9 and 12, all add considerations relating to climate change to the accountability frameworks. They are not necessary, as the Bill grants the Treasury a power to specify further matters to the accountability framework at a later date. I can assure Members across the House that the Treasury will carefully consider adding climate change as an issue to which the regulator should have regard, in the future. However, any such addition needs careful consideration and consultation on how it can be best framed. Therefore, the Government cannot support these amendments.

Amendments 8 and 11 would require the FCA and the PRA to have regard to the impact of their prudential rules on frictionless trade with the EU. Similarly, amendment 10 would require the PRA to have regard to the UK’s relative standing when making rules on capital requirements. These amendments are unnecessary. The accountability framework introduced by the Bill already requires the regulators to consider the impact of their rules on financial services equivalence. That is the main mechanism for financial services relationships between the UK and all overseas jurisdictions, not only the EU, and the Bill already requires the PRA to consider the UK’s standing in relation to other countries and territories.

Amendments 13 and 14 relate to the Help to Save scheme. We expect the majority of account holders to make an active decision about where they want to transfer their money where their accounts mature. However, I recognise that some individuals will become disengaged from their accounts, and before I turn to the specific amendments, I want to update the House on the Government’s plans for supporting these disengaged customers. Successor accounts, which are enabled by this clause, are one of the options that have been under consideration. Having carefully assessed the options, the Government have decided not to use the power provided by this clause at this point. This is primarily because of the operational issues, which mean that we would not be able to guarantee that every customer would be able to have a successor account opened for them automatically. I was therefore unable to conclude that this approach represented value for money. Instead, the Government propose to support customers who do not provide specific instructions for the transfer of their money, by ensuring that they receive their funds into their nominated bank account—the account into which they already receive their bonus payments. If the bonus payments are paid into that account, the principal amount will revert to that account. This will ensure that disengaged customers will be reunited with their savings and bonus payments.

Amendments 13 and 14 would, in effect, extend the four-year term of the Help to Save scheme by providing a guaranteed bonus for the successor account. The aim of Help to Save is to kick-start a regular long-term savings habit and encourage people to continue to save via mainstream savings accounts. The Government’s view is that a four-year Help to Save period is sufficient to achieve this objective. Amendment 14 also seeks to mandate the contacting of customers regarding the transfer of balances to a successor account. This amendment is unnecessary, as all customers will be contacted ahead of their accounts maturing, to encourage them to engage with their accounts and to provide instructions on where to transfer their funds.

New clause 2 would require the Treasury to publish a report on the anticipated use of the debt respite scheme. The expected demand and take-up of both elements of the debt respite scheme have been quantified to the extent possible at this stage and published in the appropriate impact assessments. I share right hon. and hon. Members’ determination that these schemes should work for those who need them. The Government will of course closely monitor both schemes’ usage and consider the impacts of covid-19 and the wider economic recovery on them. I am afraid that producing a report within six months evaluating the impact of changes made by clause 32 on levels of debt across the UK, as proposed by new clause 9, is not possible, as the regulations establishing a statutory debt repayment plan are unlikely to have been made and implemented by that point. I can assure Members that the Government are committed to properly evaluating both the statutory debt repayment plan and the breathing space after their commencement.

New clause 22, standing in the name of Christine Jardine, would require the breathing space scheme to commence on 31 January 2021 instead of 4 May 2021, and that is less than three weeks away. The IT system that will administer the scheme, as well as creditors and debt advisers that will implement the scheme, will unfortunately not be ready by then. I am pleased to inform the House that the breathing space guidance was published on 24 December 2020. Creditors and debt advisers will also need time to understand the guidance in order to implement the scheme in just a short period between now and 4 May 2021.

The amendment would also extend the duration of a breathing space moratorium from 60 days to 12 months. I can reassure Members that the breathing space scheme has been subject to extensive consultation, and 60 days balances the interests of a debtor and the rights of creditors, and is longer than the six weeks originally committed to in the 2017 manifesto.

I am afraid that the report on the impact of covid-19 on implementation of the new debt respite scheme proposed by new clause 23 is not feasible by the suggested date of 28 February. The Government have already quantified expected demand and usage of both breathing space and the statutory debt repayment plan in the appropriate impact assessments, and will of course closely monitor those after the schemes commence.

I conclude by addressing a number of small, separate amendments. New clauses 17 and 18 would require the Government to report to Parliament on the impact of the Bill on meeting our international obligations under the Paris agreement and the UN sustainable development goals. The Government are committed to meeting those goals and believe that doing so will require effort from all sectors of the economy. That includes the need for strong commitment from the financial services sector to continue developing into an open, green and technologically advanced industry, serving the communities and citizens of this country. Green finance will be integral to the future of financial services legislation in the UK, and our international commitments will be considered extensively. However, as the Bill is part of a much wider process, it would not be appropriate to review its impact on our international obligations in isolation.

I do not believe that new clause 1, which seeks to require the Treasury to publish a report on the standards of conduct and ethics in FCA regulated or authorised firms, is necessary either. The FCA supervises, monitors and investigates authorised firms and individuals to ensure that the relevant principles and rules are being met. It also has wide-ranging powers to investigate potential rule breaches and is further required to have regard to the principle that it should exercise its functions as transparently as possible.

New clauses 10 and 11 relate to the mis-selling of financial services. The Government have given the FCA a strong mandate to stop inappropriate behaviour in financial services, using a wide range of enforcement powers—criminal, civil and regulatory—to protect consumers and businesses alike. Following the expansion of the remit of the Financial Ombudsman Service in April 2019, 97% of small and medium-sized enterprises in the UK can now put forward a complaint.

New clause 13 relates to the Scottish National Investment Bank. We have already agreed significant financial flexibilities with the Scottish Government as part of the Scotland Act 2016 and their fiscal framework, including a £700 million reserve. The Scottish Government can manage the Scottish National Investment Bank through these existing arrangements if they choose to prioritise it.

I know that a number of Members have strong views on a proposed statutory “duty of care” for the FCA. As the FCA is already taking steps to ensure that financial services firms exercise due care and regard when offering products, services and advice, a statutory duty of care, as proposed by new clause 21, is not necessary. I am afraid that I do not see the case for amendments 5 and 6, which would respectively seek to provide a power for or impose a duty on the FCA to require investment firms to publish quarterly statements on portfolio holdings. The FCA already has the ability to impose public disclosure requirements on FCA investment firms under its general rule-making powers. The content and frequency of any disclosure requirements should be determined by the expert regulator, and the FCA is best placed to determine that level of detail.

I look forward to another session of robust and informed debate, and I hope that I have provided the House with clear and reasonable explanations for the Government’s position on the amendments before us today. Thank you for your patience.