“The scale of money-laundering is very large, and the Government and the regulators are determined to cut it down”.—[Hansard, 15/10/13; col. 406.]
The phrase “cut it down” was prudently chosen. Money-laundering, in its widest sense, never goes away. By “its widest sense”, I mean any attempt to create an illicit flow of money for illegal objectives: money-laundering, drugs, terrorism, bribery—whatever it might be. I will use the term in that sense throughout what I am about to say.
The purpose of this group of amendments in my name and that of my noble friend Lord Watson is to identify as clearly as possible a legislative framework within which our banks can be regulated and monitored so as to achieve one of the Financial Conduct Authority’s objectives: to preserve the integrity of the British banking system. I will deal with them briefly. Amendment 26 deals with a scope of responsibility of senior management so as to specify, in a very broad phrase,
“a relevant financial scheme giving rise to criminal liability”.
That is carefully chosen as an omnibus phrase to cover all the kinds of money-laundering activities that I have just described and relates such irresponsibility directly to senior management.
Amendment 28 deals with two issues: redundancy and specificity. “Redundancy” is in inverted commas because it was suggested in Committee that these changes were entirely unnecessary. Plainly, the Financial Conduct Authority and everybody else have a duty to obey the law—of course they do. However, equally, legislation has a component in it that should be designed to relate the existing law to the specific responsibilities to be carried out. No harm is done by such identification, and clarity is achieved. Nobody can say that they did not know. On specificity, subsection (4)(a) of proposed new Section 59ZA in Amendment 28 deals with a general provision for dealing with these schemes that might produce criminal liability. Paragraph (b) sets out the main statutes under which such activities can arise. Paragraph (b)(viii) makes clear that the FCA and the PRA themselves can refer to other relevant statutes, regulations or the like as they think appropriate and are specified in their rules.
Amendment 30 is an attempt, in substance, to achieve the objective of making all persons responsible who engage in money-laundering activities, so that there are no loopholes between different levels of staff and management. Amendments 45 and 47 would provide that the FCA and PRA should, in the banking standards rules, make rules about money-laundering similar to the effect of what these amendments seek to achieve.
I suspect that the velocity with which this legislation is being managed by government managers is certainly not matched by the capacity of the Treasury officials and Ministers to keep up on the days on which they have to explain what is going on. That certainly makes it extremely difficult for us, when dealing with matters of such grave importance, to be able to ensure that debate is comprehensive. Therefore, the noble Lord, Lord Newby, having stated in Committee a month ago that he would write to me to explain why my amendments were unnecessary, in a way did so at 9 pm last night, when an e-mail arrived from a Treasury official which enclosed a note from the Financial Conduct Authority. I hope that he has had time, as I have this morning, to read it, if it represents government policy on the question.
I will turn to that important piece of information from the Financial Conduct Authority about money-laundering in a moment. However, it refers to the annual report of the anti-money-laundering activities of the Financial Conduct Authority, published in July of this year, which I had not previously seen. The Financial Conduct Authority was set up with effective powers on
“We concluded that it was likely that some banks were handling the proceeds of corruption and other financial crime”.
“More recently, our … review … found that most banks, including a number of major UK banks, were not giving adequate attention to money laundering red flags in trade finance transactions”.
“The root cause of these problems is often a failure in governance of money laundering risk, which leads, among other things, to inadequate anti-money laundering resources and a lack of (or poor quality) assurance work across the firm”.
That is within the past eight months, after the banking crisis and during the passage of this Bill. Do we need any better evidence of the gravity of this problem than what I have just summarised? The report says that, in seeking to achieve its objective of integrity in our financial system, the Financial Conduct Authority will issue annual reports to meet the increasing public interest in this problem. Finally, they will do everything, in so far as they can, with transparency. Those are excellent objectives.
I turn to the note, which I assume is what the Government intend the Financial Conduct Authority to do. First, it says that combating this problem is a “priority”. Secondly, it says:
“Our approach is intensive and intrusive”.
Further, it will “take enforcement action”, as it has done against two banks; one last year, one this year. Finally, it will seek to intervene early. In the light of this note, as I understand it, it is the Government’s view that the Financial Conduct Authority should police this sector without further statutory change. I invite the Minister to confirm the following: first, that the Government have no reason to doubt the reliability of the annual report’s conclusions; and, secondly, that they undertake properly to finance the anti-money-laundering group in the Financial Conduct Authority. It has about 100 cases a year and polices 14 major banks and many other firms; yet the group, by the end of this year, will have increased its staffing numbers from 17 to 22. That is an extraordinarily low number of people to combat such complicated and wide-ranging money-laundering problems. Is there to be a financial commitment? Lastly, on the note itself—put out last night as, I presume, a summary of the Government’s view of what should be done—will the Government say clearly whether it is their policy that that which is set out in this document is what the Government intend should be done by the Financial Conduct Authority on behalf of all of us in combating money-laundering?
The problems of banking affect everyone and they have done so in recent years. There are many problems to be dealt with in these debates. The one thing, surely, that must be dealt with adequately is criminality associated with banking; that is, criminality—criminal offences—not just one risk-take. It is a remote second for most people but has an enormous financial impact. I call on the Government and the Minister today to state with absolute clarity their position on the points that I have raised and on which I have invited them to agree. I beg to move.