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there is simply uncertainty about what operational difficulties might arise
Banks already seek to apply the FATF country risk assessments conscientiously.
The FATF recently made statements on two countries, Pakistan and Uzbekistan, which resulted in many of the banks based in London but with significant customer bases in those countries taking a decision to raise the risk profiles on their internal assessment bases and extend those to carrying out enhanced due diligence and monitoring. The BBA says:
If the extended powers from this legislation were to be applied on a widespread basis and on a large scale, this would have a disproportionate operational impact on banks which is plainly not possible to quantify at present.
The banks are doing their best to respond to increasing risk, but they do not know what effect these new regulations will have on them or whether, particularly given that some are in a fairly fragile state at the moment, they will add to costs.
To put this into context, a large high street bank may have 3 million UK payments transactions a day and some 45,000 cross-border transactions. The BBA thinks that these provisions appear to mean that
banks may have to identify single transactions from among these totals or identify individual accounts and cease or limit business on an individual account. This could require a whole new team of staff
with specific new skills given the width of the Directions. Given the potential penalties for non-compliance, it could be difficult to find suitable staff willing to undertake this type of work (see Part 7 of Schedule 7 at para 30(5) where on conviction (for failure to comply with requirements imposed by direction) a person may receive a term of imprisonment for a term not exceeding two years or a fine or both.
A job may not look very attractive if the bank offering it has to say, in all honesty, We dont know how these regulations are going to work. We dont know if our systems can cope with them because nobody has consulted us about bringing them in. If they cannot get the people to do the due diligence and regulation, then passing this legislation may well do more harm than
good. It also makes a point about the term financial restrictions. The BBA believes that a requirement for intensive manual implementation and monitoring could be introduced. It says that the term is not properly defined in the legislation, so it is impossible to anticipate how the Treasury might seek to implement it.
The BBA says that it is not clear how the proposed legislation could affect the banks decisions to take commercial decisions to close, or exit, customer accounts that are the subject of monitoring orders. It makes another point that seems valid, and which I hope the Economic Secretary can address. The proposal takes no account of the fact that there is an established process with the Serious Organised Crime Agency for exiting customer relationships. The orders may run for a year, which could completely cut across SOCAs existing procedures. I hope that that is not a symptom of legislating in haste, and that other parts of the legislative jungle are not being cut through by this Bill. We have all seen that happen in the past. One Department produces legislation while the legislation of another Departmentin this case, the Home Officetries to do the same thing in a different way, but the two teams have never got together. The result is chaos. There is a strong possibility, if we are to believe the BBA, that that will happen in this case.
As I said, the BBA produced a series of recommendations, all of which I would like the Economic Secretary to comment on. He will say that some of them are impractical, and I will agree, but I hope he can at least give the House his initial thoughts on them. The BBA would like the Government to give the industry an opportunity to comment on any of the reports to Parliament on the Treasurys exercise of powers under the new legislation. That would be an obvious and easy thing to do. If there are going to be regular reports to Parliament, as well as discussions on the Floor of the House, Select Committees will become involved and the banks can give evidence to those Committees.
The BBA also suggestsI suspect that the Economic Secretary will jib more at thisthat any agreed new powers should be subject to a one-year sunset clause. That would allow for immediate implementation, which is before us now, but could later allow such powers to be replaced by more considered legislation. It wants further consideration of the scope of the proposed legislation, as some professional bodies that undertake financial transactions appear to have been excluded. That is my understanding of the legislation as well, and it is a legitimate question for the banks to ask. I can see why professional bodies that carry out financial transactions on behalf of their members may be excluded, but I can equally imagine why the banks, for which such transactions are their central activity, will feel somewhat hard done by if they are required to fulfil obligations that are not placed on others. At the margins, that might have some effect on the competitive environment.
The final BBA recommendation was that guidance should be produced on scope, likely impact, right of appeal, oversight and legal issues before the new powers are exercisable. I understand that the powers will be exercised the day after the Bill has completed its passagein all likelihood, within the next week. I hope that, as we speak, teams of the Treasurys best brains are producing
guidance and that it is ready to roll. If not, may I suggest that they get on with it quite quickly, because the banks feel that they are to be faced with an entirely new world and do not know how they are supposed to behave in it? I am sure that the Economic Secretary agrees that that would be a somewhat unsatisfactory position.
I have almost never read such an anguished briefing at this stage of a Bill from a significant trade body, which is directly and seriously affected by this measure. The BBA is clearly in some pain because of the Bill and because it has not been properly consulted. I hope that the Economy Secretary can reassure the House and, perhaps more important, the BBA, that the body will become part of the process.
The underlying point on which I would like the Economic Secretary to reflect is that, although we support the intention behind the amendments and hope that the measures turn out to be practical when they are implemented, it is important that the Treasury does not impose unnecessary burdens on businesses in the current climate. The aim must be to avoid a disproportionate operational impact on business and to ensure that the new powers are interpreted and applied so that they provide the protections that we all want against terrorist financing but do not either make business more difficult to conduct in London or, to take it to extremes, drive business away from London, which would be bad for the economy and for fighting terrorist financing. People might be driven to jurisdictions that are less conscientious about trying to clamp down on such financing.
Although we support the general thrust of the amendments, the Economic Secretary has much on which to reflect and much to do to reassure those who will be directly affected by the regulations that they will not do great harm along with the good, which we all support.
Chris Huhne: I shall try to be brief because many of my concerns closely mirror those of the hon. Member for Ashford (Damian Green). We are passing significant legislation, which includes new criminal offences, in the most extraordinary way that I can remember in this placenot that my experience here goes back very far. However, when we dealt with financial legislation in the European Parliament, I was pleased to have Treasury support for European Parliament amendments that introduced sunset clauses precisely because we were concerned about the implications of different financial regulations and we wanted to build a firm framework in which they would be reviewed. A four-year sunset clause is built into most European financial regulations for that reason. I am sympathetic to the British Bankers Associations view that a sunset clause is appropriate.
Given that significant powers have been introduced in amendments in the Lords at a late stage, which have not been scrutinised in Committee here or even undergone careful scrutiny in another place, we are taking on trust from the Treasury basic aspects of legislation and the need for significant Executive powers. Liberal Democrat Members are reluctant to entertain that. We had taken the view, as we did in the Lords, that we would be as supportive as we could, but I reinforce the request of the hon. Member for Ashford for Treasury reassurance.
The amendments do not even provide for an impact assessment, which is meant to be a clear requirement for new regulations according to Government policy, as is
the case with European legislation. There is no sunset clause. It would be useful to have an assurance from the Economic Secretary on the record that a formal review will be conducted, perhaps with a report placed in the Library, so that we can ascertain the practical application of the new provisions.
I find it worrying, too, that the people who are expected to apply the new regulationsin other words, the financial sectorhave not had the benefit of clear guidance, even on something as fundamental as the right of appeal. That is not the sort of procedure that one would normally expect in legislation that has the effect of introducing new criminal offences. I had occasion to scrutinise a Finance Bill on its progress through the House a couple of years ago, and I know that the Treasury plays fairly fast and loose on amendments to the Finance Bill. However, we are not talking about tax; we are talking about possibly depriving people of their liberty. The Treasury needs to be cautious about applying the light approach that we have seen it take towards tax legislation to something that serious.
Although we shall support the proposal, albeit with a heavy heart, as we did in the Lords, I very much hope that the Minister can provide us with reassurances on the impact and on review and repeal, if not through a formal sunset clauseif the Treasury accepts the principle of sunset clauses on EU financial legislation, it should surely be prepared to accept one in this case. I hope, too, that he can give a firm commitment to provide guidance as quickly as possible on such key matters as scope and the right of appeal to those institutions that will be affected.
Ian Pearson: Let me respond briefly to the concerns that the hon. Members for Ashford (Damian Green) and for Eastleigh (Chris Huhne) have raised. I explained the need for the legislation in my opening remarks and do not wish to reiterate that. However, I should point out that, as I explained, the fact that the Financial Action Task Force did not specifically invoke the countermeasures meant that the UK could not exercise its powers under the Money Laundering Regulations 2007. I simply make the point that those regulations are already on the statute book. The British Bankers Association and others are aware of them and how they are implemented on an ongoing basis.
The Government recogniseand apologise forthe fact that the procedure has not been ideal and that there has been less time than we would have liked for consultation. However, we made significant efforts to consult relevant bodies before the amendments were tabled and some improvements were made to the provisions as a result. We were keen to consult the industry and have been working with the BBA. I can give the House the commitment that we will continue to work with the BBA on the detail of implementing the legislation, as well as with the joint money laundering steering group, which is a group of industry systems and compliance experts. We have also consulted all 28 of our current money laundering supervisors, which includes the FSA, the Office of Fair Trading and a range of professional bodies, such as the Institute of Chartered Accountants in England and Wales and the Law Society. The Serious Organised Crime Agency has also been consulted. As the powers are UK-wide, we have also consulted relevant bodies in Scotland and Northern Ireland.
The hon. Member for Ashford mentioned Landsbanki. We did not use anti-terrorism provisions when we took the actions that we did with regard to Iceland; rather, we proceeded on the grounds of economic security. The Anti-terrorism, Crime and Security Act 2001 goes much further than terrorism, as I think the House is now aware.
Let me give the hon. Member for Ashford and the House the reassurance that there is no intention to duplicate or cut across existing SOCA procedures. We are certainly reassuring the industry of that and we are working with SOCA to ensure that it remains the case. Banks are already obliged to screen transactions for money laundering and financial sanctions imposed by the UN, the EU or the UK. The same systems and staff can be used to implement a direction to limit or cease business, minimising additional costs to any future organisations. We will, as I said, work closely with the industry on detailed issues of implementation, which is only right and proper.
I welcome the support of the hon. Member for Ashford and that of the hon. Member for Eastleigh, even though it is perhaps grudging in the latters case. This legislation is important and I accept that the procedure has not been ideal, but we will continue to work with the industry on any decisions or directions to be taken in the future.
Chris Huhne: I detect that the Minister is about to wind up, but he did not reply to my specific point. I asked him whether, given the rushed nature of the legislation, he would undertake to produce a report on its operation after a year and to place it in the Library.
Ian Pearson: There are provisions in the amendments for an annual report in any event. The hon. Gentleman also asked about a sunset clause, but it is not possible or appropriate at this stage to introduce such a clause. We have clearly said, as I emphasised in my introductory remarks, that directions will last for a year. They can be revoked within a year, if appropriate, but they will then lapse. In that sense, they will be sunsetted after a year and renewed only if deemed appropriate.
I have tried to assure hon. Members that, where there are concerns about implementation, we are continuing to work with the industry. I have tried to explain that, as far as possible, we will use the existing standard procedures with which the industry is familiar. With those final comments, I hope that the House will accept the amendments.
Mr. Coaker: I apologise for my earlier rush to the Dispatch Box, Mr. Deputy Speaker. I believe that we have agreement to moving this group of amendments en bloc, as the Government agree with all of them.
Mr. Deputy Speaker: Order. At this stage, the Minister can move his agreement only with Lords amendment No. 1. We then deal with the others formally in sequence, but I am afraid that we cannot cover them all straight away. They have to be dealt with in their proper order.
Mr. Deputy Speaker: With this it will be convenient to discuss amendment (b) to the Lords amendment, Lords amendment No. 17 and Government amendments (a) and (b) thereto, Lords amendments Nos. 18 and 19, Lords amendment No. 20 and amendments (a) and (b) thereto, and Lords amendments Nos. 21 to 24.
Damian Green: The amendment deals with post-charge questioning, which has been one of the themes of many arguments advanced by Conservative Members about how terrorist outrages can be fought effectively. We have suggestedindeed, this constituted a significant part of the debate on whether people should be detained for 28 or 42 daysthat other methods are available that could prove more effective, including post-charge questioning. The Government now agree that post-charge questioning should be authorised, and we are delighted that they listened to our arguments. They also agree with us that the questioning should be supervised by a Crown court judge, which we also welcome.
Our problem lies in the fact that the concession is limited in an important respect. Under the Lords amendment, a Crown court judge will not be able to impose conditions relating to the matters in respect of which the questioning is authorised. We think that that is a significant gap in the armoury. As I have said, we have argued for a long time that post-charge questioning would be useful, but we also believe that the process must have integrity, and must be accepted unquestioningly as fair by all who may find themselves being investigated. Obviously, that applies particularly to people who are entirely innocent.
We have all observed from the various actions of the police in recent years that mistakes are sometimes made, and the wrong people are sometimes identified. If it is felt that the system behind those mistakes is unfair, that may, at the margin, aid terrorists by providing them with a more sympathetic audience. We are determined to ensure that that does not happen, and we believe that judges who have authorised post-charge questioning need to be able to exercise proper judicial supervision. We fail to see how that they can do that if they have no authority in relation to the scope of the questioning.
where the police wish to continue to question after arrest and charge
are perfectly free to go back to ask any question they choose on any matter about which the judge
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