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5.43 pm
Mr. Andrew Mitchell (Sutton Coldfield): It is a great pleasure to follow the hon. Member for Central Fife (Mr. MacDougall), who made an excellent maiden speech. He told us about his constituency and, in particular, that Fife was an ancient kingdom. I empathise with him. Sutton Coldfield is a royal town, so we have something in common. He spoke about the ramifications of the dreadful events of 11 September and the fact that they had been visited on his constituency. He mentioned the menace of drugs and said, with expertise and wisdom, how we should ensure that young people in particular do not enter the drugs culture.
The hon. Gentleman spoke eloquently about his predecessor, who was greatly respected in the House and a friend of many of us. At one point, he wondered whether the House would find his speech interesting. I can assure him on behalf of everyone present that we certainly found what he said interesting. We look forward to his future contributions to our proceedings. The only reservation that I would put to him is that he referred to the Liberal Front-Bench spokesman as his hon. Friend. He will discover that the one thing that unites his party and mine is the belief that the Liberals are not our hon. Friends.
I should at this stage declare an indirect interest, which will of course appear in the Register of Members' Interests. I am a director of Lazard and some of its subsidiaries, although my role is minor. Lazard is not a retail bank, so the interest is indirect.
The Bill is important and I am glad that it commands general support throughout the House. It builds on the approach adopted in the 1990s by the Government of which I was a member. I hope that Ministers will listen with care to the words uttered by my hon. Friend the shadow Home Secretary, as his speech was an important one. He strove to support the Government, but made several important points that will have to be discussed in Committee. The words that should have caused a tremor to run down the spines of Ministers was his likening the new agency to the Child Support Agency. The Minister of State, Scotland Office will recall that I had ministerial responsibility for that agency from 1995 to 1997, when I left the House. The Government should pay heed to my hon. Friend's comments on that point.
The Bill consolidates and reforms existing money- laundering provisions to create a single regime for offenders. That is an extremely important development. When in 1997 I returned to the City, having lost my seat, I was struck by the change in attitudes that had occurred, especially the vast amount of new regulations that had been introduced. It is not generally known that people who want to work in the City have to take an examination, which I found challenging. Although I cannot recall every tenet of what I learned for that examination, I do remember that the maximum penalty for being involved in money laundering is 14 years in jail. There has been a huge change in the way in which the regulatory framework and the administrative back-up that accompanies it is implemented in the City.
I apologise in advance to both Front-Bench teams for the fact that a long-standing and unbreakable commitment might result in my being a few minutes late for the winding-up speeches. I have only three points to make, and I hope that they will be helpful.
The first relates loosely to clause 324, which deals with the offence of failing to disclose. Previously, the terms applied to drugs and terrorism offences, but they are now to apply to money laundering. My understanding is that if a relatively junior employee of, for example, a finance house turns out to be a rotten apple and is caught offending, the financial institution as a whole will be held to have committed an offence—notwithstanding the fact that it has its own rule book and has made substantial compliance efforts.
It strikes me as hard to impose criminal liability on people who should have known what was going on but did not. It is especially hard, given that the new regulatory regime—I pay tribute to the Government for having listened carefully to practitioners before N2—under civil law is not yet even up and running. It will not be operational until 1 December. Under the Bill, people will be punished and in some cases jailed under criminal procedures when the new, carefully crafted civil procedures, which were debated at length by Parliament, have yet to be introduced. In his opening remarks, the Minister dismissed that point, but I urge him to consider it in Committee.
Substantial powers are now vested in the Financial Services Authority. I have great faith in Sir Howard Davies, who is a fine public servant, but we must hope that his successors will wield what is a very big stick sensibly in their regulatory tasks.
Mr. Kidney: On the widening of the duty of those engaged in financial services to report suspicious transactions, I understand the concern that is being expressed about the change from an objective to a subjective test. However, did not the hon. Gentleman go a little too far in saying that a company could comply with all its procedures and still be convicted? Does not the Bill specifically state that following industry guidelines is a defence against such an allegation?
Mr. Mitchell: I hope that the hon. Gentleman is right, but that is not my understanding of the effect of the clause; nor is it the understanding of many in the City.
There is clearly a significant problem with money laundering, but no one seems to have the faintest idea how substantive it is. There is a danger in implementing or crafting a solution to a problem that is unquantified. How great a menace is money laundering? How successful are we in seeking to combat it? How does it happen? Where does it happen? Is London good, bad or indifferent in its attack on money laundering? Should not we define the problem first?
When we open a bank account, we are required to send, among other things, our passport or a number of other documents. It is an enormously burdensome and bureaucratic procedure. If it helps the process, it is necessary and we are right to do it. However, has anyone established whether it helps? Bureaucrats have mushroomed, along with departments that police us all and internal auditors. Is 90 per cent. of all this a complete waste of time? We do not know. It would be interesting to have an answer. Perhaps the Minister will be able to help us when he replies.
I know that the FSA is worried about hedge funds. It believes that they could be vehicles for money laundering. They represent the fastest growth area of investment management, and by definition they are global. They are colossal businesses. They deal with individuals rather than institutional money, and they are clearly not so well regulated as other sectors of the industry. Hedge funds are the nerve ends of capitalism, but do the authorities have any idea of the extent to which money laundering is taking place? We must not set in place a solution to an unquantified problem.
My final point was touched upon by the hon. Member for Lewes (Norman Baker), who spoke from the Liberal Democrat Front Bench. Whatever we do in Britain or in British territories overseas will be ineffective unless it is replicated elsewhere. There is no point in blocking the fox holes in London if the foxes reappear in another jurisdiction. The European Union has a major part to play. It may warm the cockles of the heart of the shadow Attorney-General, my hon. Friend the Member for Stone (Mr. Cash), if I note that this is an area where, as with macro-environmental issues, there is a role for the EU. These issues need to be dealt with on a supranational basis.
This is an example where the EU would not be interfering in the minutiae of national life, but would be doing a great service to the financial community world wide. It would be policing its own member states and influencing other states. For example, there is much concern about how the Swiss deal with money laundering. There was a headline in a newspaper on 19 September stating that the Swiss were to take another look at money-laundering regulations following a scathing report. There had been recent press coverage of money- laundering links between Swiss banks with hidden funds for Helmut Kohl, Sani Abacha and Slobodan Milosevic. The Swiss Minister of Finance, Kaspar Villiger, was recently quoted as saying that banking secrecy is no protection for criminals. I beg to disagree with him.
It is hard to come to a conclusion other than that the Swiss reputation for banking excellence is all too often based almost exclusively on its secrecy rules. As recently as 14 July, a journalist on The Guardian investigated the issue. He found that it took 20 minutes to hide his cash in a Swiss bank account. I pass over the advertisement which I believe appeared in The Economist for a job in a Swiss bank as "Head of money laundering". I presume that that was a misprint. In any event, that underlines the concern about these matters.
I conclude where I started. The Bill is an important measure and I hope that it will benefit from a bipartisan approach. I hope also that, in taking major powers to tackle significant problems, we can retain a degree of humour and common sense between those on the two Front Benches to enable us to get things right.
5.55 pm
Mr. Ian Davidson (Glasgow, Pollok): I never envisaged speaking in the Chamber on an occasion when the Conservatives would be seen as the party of civil liberties, although they were only the party of civil liberties for the wealthy with no noticeable means of support. Nevertheless, it is a welcome step forward. However, it is clear that they operate in a different world from the rest of us. If someone has managed to buy a big house and has a business and several flash cars but no visible source of income, it is not usually assumed in my community that the money has merely been inherited but that it has come from somewhere else. That is the difference between us.
I was fascinated by the shadow Home Secretary. It is on such occasions that I think, "Thank you, God." His speech portrays Conservatives as the friends of criminals. They are more interested in the one or two who might be dragged through a court unnecessarily than in protecting working-class communities such as the one that I represent from criminals, including drug dealers, who prey upon them.
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