My Lords, while UK parliamentarians are not currently considered to be “politically exposed persons”—or PEPs—domestically, revised global standards to which the UK is fully committed will require that they are treated as such. These global standards require enhanced due diligence and ongoing monitoring only when the business relationship is assessed as high risk. The UK will make representations when negotiating the fourth money laundering directive to ensure that it reflects these standards.
My Lords, I am afraid that my noble friend’s response is only partly reassuring. Even before the fourth directive has come in, many Members of this House and their relatives are being treated as PEPs. I myself and my son were unable to access an ATM and my brother was unable to exercise a joint power of attorney. What steps is the Treasury taking to show Members of Parliament in both Houses that in future they will not be treated in exactly the same way as a deposed dictator or a political pariah?
My Lords, the key here is in the approach of the banks in doing their due diligence appropriately. The main feature of these arrangements is that domestic PEPs should be assessed in terms of their level of risk, and in the main UK parliamentarians should be assessed as low risk and, frankly, treated in precisely the same way as any other customer. The problem is when banks do not apply the right kind of risk-based assessment and instead revert to inappropriate box-ticking approaches.
My Lords, perhaps the Minister will explain that to the clearing banks in this country. Perhaps he could explain why my daughter, who was then aged 12, was required to appear with her driving licence and a utility bill in her name in order to be allowed to have a savings account with no more than 40 quid in it.
I absolutely accept the criticisms that are made where banks behave disproportionately. It happens too often and we should work with them to fix that. I will certainly undertake to look at the revised guidance that will be coming out as part of these arrangements to ensure that the banks take a proper, risk-based approach which is sensitive to the real risks involved in these transactions. I would encourage Members to follow up with their banks when there is a problem. It is appropriate to complain to the Financial Ombudsman Service, which is a facility that we have in place. I took the liberty of looking at the number of complaints about PEPs received by the financial ombudsman. I think that there were around 50 in 2013 and 30 this year out of a total of half a million complaints. However, I encourage Members to pursue their interests.
It is always difficult for me to comment on individual cases. I think that Members are making their points very clearly, with a variety of illustrations that I absolutely take on board. I will certainly follow up with the banks domestically through the Joint Money Laundering Steering Group, which provides the guidance. We are trying to strike a balance that makes it impossible for corrupt politicians, terrorists and criminals to go about their business but which leaves the rest of us unimpeded to go about our lives in a normal way.
My Lords, the position of Members of this House and of the Commons is far worse than the Minister suspects. Some 150,000 people are rated as PEPs in this country, covering virtually all Members of this House and the House of Commons, including all spouses and all children. Wearing a hat as a banker I would add that, worst of all, banks are required to look at every transaction in the account of a PEP, both in and out, to satisfy themselves that they are proper transactions. The world of PEPs is by no means limited to just those who someone thinks are high risk. It covers virtually everybody and is completely out of control.
My noble friend is correct that the PEP definition includes close family members and business associates. I go back to the original point that it is not within the banks’ responsibility to look at every transaction of a domestic PEP; they should be assessing whether that PEP is high risk. If the PEP is not high risk, the banks should treat them like every other customer. That is where we need to focus our efforts to correct this problem.
My Lords, I do not think that the Minister has taken on board the full range of problems, as other companies also put an unreasonable interpretation on this requirement. I am far from convinced that the way it has operated has at any time been useful in stopping money laundering, and we need to take a much harder look at it. It would be far better to look at other methods of checking for money laundering than simply asking for a person’s occupation and then declaring that they may therefore be a risk.
First, my Lords, I need to make the point that having an effective, comprehensive, international campaign against money laundering is a critical weapon for us, and we are taking leadership in this area. I absolutely accept that the implementation domestically needs to be significantly refined. As I have already said, I will work with the FCA and the industry bodies to ensure that we have a more proportionate application of the rules.
My Lords, the Minister started his remarks by saying that those of us in this House should have little to worry about. I have to say, from personal experience of having an account in France to look after the small needs of the home that I own there, that one is treated as if it were the Spanish Inquisition. They really do not want to know any differently. Can the Minister give an assurance to the House that he will convey to his colleagues in Europe that these rules are meant to be applied reasonably and not draconically?
My Lords, I am sure that the Minister will accept that his answers have not entirely reassured Members of this House who are treated as politically exposed persons. Perhaps he can explain to me and to many of my colleagues who are not members of the Government: what is it that we might do, or what might be done to us, that makes us politically exposed people?
The thing to remember is that although the intention behind this approach is to catch potentially corrupt public officials around the world, defining someone as a PEP is not an end in itself—it is merely a trigger point at which an assessment should be made of the individual’s business and whether it is high risk. It is that assessment of whether it is high risk that is not working well enough at the moment.
My Lords, is it not clear that the House is struggling with two concepts: on the one side, that the Minister might be right; and on the other, that something good might come out of Europe? On this occasion, both things obtain.
I am not sure that there is a particular answer to that. I think that I have been extremely clear about what we are trying to accomplish. I accept where the challenges are and I accept that we need to do a lot of work with the banks on the implementation of the rules to make sure that they are proportionate.