| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
11 Nov 2008 : Column 586
Lord Goodhart: My Lords, I wish to add to what the noble Baroness said about the Delegated Powers and Regulatory Reform Committee. Owing to the extremely short notice that was given to us to deal with a very substantial set of amendments, the committee has been unable to look at them so far but will consider them tomorrow. We may recommend that certain alterations should be considered, which would take the form of amendments to the provisions passed by your Lordships' House today. I cannot say what will happen until the committee has met, but I think that there may be one or two matters on which we will make recommendations.
Baroness Miller of Chilthorne Domer: My Lords, we on these Benches support the broad thrust of these amendments, which introduce important powers to help combat money-laundering and terrorist financing and proliferation by restricting financial interactions with the designated groups or individuals that the Minister talked about. We understand that this is a very important step which is in line with the recommendations of the FATF. Therefore, we are sympathetic to the introduction of the powers. However, we believe that it is necessary to introduce an amendment at least to seek some assurances from the Minister. These are very potent regulations with the ability to require, at the say-so of the Treasury, a business to completely cease trading with another business or with the whole of a Government. In fact, they constitute some of the widest powers on finance matters that I can remember coming through this House. As the Minister said, only any one of three conditions needs to be complied with. After the recent example, which the noble Baroness, Lady Neville-Jones, mentioned, of the Landsbanki Freezing Order, we really have to be very careful about hasty decision-making which can lead to problems later on.
Although I have heard the Minister’s explanation, I am surprised that the Government have introduced the amendments so late in the day. I emphasise that, and I would be grateful for the Minister’s comment on that. The FATF conducted its third mutual evaluation report of UK compliance and made its recommendations over a year ago, in June 2007, as I understand it. Why has the Treasury left it until now to introduce the amendments? Unless I have that date wrong, it has had more than a year to think about it. I would be grateful to understand why it has taken that length of time.
The difficulty created for Parliament by that lateness has been compounded by the fact that the Government have presented Members of this House with a moving target. I am very grateful to the Minister for giving us sight of the amendments in advance, and to members of his team, who went into considerable detail on questions that my researchers raised. However, the Government have changed the amendments over the past few days, so that it almost seems as if the Treasury is conducting an ad hoc consultation right up to the wire. Its willingness to discuss the amendments in depth with us has helped that, but it is certainly a very difficult situation to deal with.
My second point relates to the mutual evaluation report published by the FATF last year. Why has the Minister chosen to react to only a small selection of
11 Nov 2008 : Column 587
I tabled Amendment No. 61B to compensate for the scrutiny gap that comes with the speed with which these powers are being introduced. We are grateful that the Minister has decided to include the annual report to Parliament, which we considered to be the biggest gap in the amendments that were initially brought forward. My amendment is intended to probe what would be in that report. I would not want to see the amendment added to the Bill, because by specifying exactly what should be in the report, one is bound to overlook something. It would then be said, “That is not in the report because it was not specified”.
I would very much like the Minister to comment on the specific issues raised by my amendment. Of particular concern is the fact that under proposed new paragraph 3(1)(a), the Treasury can issue a direction to a particular person, which could be a financial institution, without any sort of parliamentary oversight. For directions that apply to a sector, on the other hand, an order would have to be laid before Parliament.
The Minister’s team tells me that the reason why individual firms could not enjoy the same parliamentary protection is that it would be resource-intensive and would waste time. However, they also told me that they do not imagine that the power would be used very often; but those arguments seem somewhat contradictory.
How often do the Government anticipate using these powers to issue directions to sectors and particular persons? I recognise that that might be a difficult question to answer, but there must be a little bit of history to rely on. The government briefing suggests that they are ready to use these powers in relation to Iran. Perhaps that provides some indication of the number of occasions on which they intend to use them, if they have carefully looked into this matter. Because of these concerns, my amendment requires the justification of the use of a direction against a person, rather than a sector.
My amendment then requires the Government to provide a breakdown of each of their three new powers and the countries to which they will apply. In addition, I specify that the Government should disclose the names of businesses affected and a summary of the intelligence that backs up the decisions, with a safeguard specified at the end of my amendment that national and commercial interests should be protected. That
11 Nov 2008 : Column 588
5.15 pm
Lord Harris of Haringey: My Lords, like the noble Baronesses, Lady Neville-Jones and Lady Miller of Chilthorne Domer, I support the general thrust of this group of amendments, which are important in addressing a genuine and real problem. Like them, too, I have some concerns about the amount of time that noble Lords have had to consider the amendments, but I am particularly grateful to my noble friend Lord Myners for the considerable efforts that he has made in the past week or so to allow the fullest possible consideration of these detailed changes.
One of the problems with these provisions appearing in a counterterrorism Bill, as they have had to because of the timetable with which we are now faced, is that this will lead, when the powers are used, to the sort of comments that we have heard in your Lordships’ House today about the use of so-called counterterrorist powers in freezing the assets of Landsbanki. That is unfortunate because, as I understand the situation, the powers used in that case were not specifically counterterrorism powers but, as they resided in a Bill that was primarily about counterterrorism, the assumption was that they were. There is a danger that a similar situation will arise in respect of these provisions, which are, quite properly, much broader than counterterrorism, because they will reside in what will ultimately be an Act that relates to counterterrorism. That is a problem that we have to face and the greatest possible clarity must be given to explanations relating to this.
I have a specific question, which I hope that my noble friend can answer. He assured us that estate agents, casino owners and lawyers were not the subject of this Bill. We all acknowledge that they are popular categories of persons among some of your Lordships, but I wondered whether paragraph 8(1) of the new schedule would enable the Treasury to amend the paragraphs to which it refers to include other categories of persons. Perhaps we may have some clarity on that when my noble friend replies.
My general point is that, if a country’s arrangements are so weak that it is easy for people to engage in money-laundering activities, the financing of terrorist activities or the financing of weapons of mass destruction, it is imperative that as a nation we have put in place powers that mean that people in this country who are engaged in trade or financial transactions with those countries are subject to the widest possible warnings and the widest possible expectations of what they should do to safeguard the position. Without such powers, we may not know what people in this country are implicitly supporting in terms of money-laundering. These provisions are important for that reason.
Baroness Carnegy of Lour: My Lords, I underline what the noble Lord, Lord Goodhart, said as chairman of the Delegated Powers Committee. These are quite complex amendments; I find them extremely complex
11 Nov 2008 : Column 589
The noble Lord, Lord Goodhart, pointed out that not only does the House have to consider the amendments at short notice but the Delegated Powers Committee has to, too; it is meeting tomorrow. Having been a member of that committee, I know that quite often there are emergency meetings—they have to happen—and that the committee attempts to respond to emergencies. However, from what we have been told, this is a somewhat unnecessary emergency. The Delegated Powers Committee could make a mistake because of speed. I do not suggest that it will—I am sure that it will not—but it could.
The Government should not move the amendments today but should wait until Third Reading so that the House can consider what the Delegated Powers Committee says. The order-making powers in the amendments are important and this simply must not be done wrong. That may sound a silly suggestion to the Minister but I do not think that it is; the Government would do well to wait and move the amendments at Third Reading, when the House could consider the whole thing properly.
Lord Mayhew of Twysden: My Lords, I endorse what has been said about the general thrust of the amendments, which I of course support, and what my noble friend Lady Carnegy said about complexity and the dangers that go with attempting to legislate at such speed, albeit in necessary circumstances.
I have one small point to raise, which I have not made the subject of an amendment. It is a faint point that I raise in the interests of consistency about the drafting in line 213 of government Amendment No. 61A, which is to be found on page 12 of the Marshalled List that was published on 7 November—I hope that there has not been a subsequent one. My point gives rise to the question whether there is any difference in meaning between undertaking enhanced customer due diligence measures and taking enhanced customer due diligence measures. This is very much a nit-picking point but nits, if left undealt with, can turn very toxic. It is a point for Committee, but there is no opportunity to take it elsewhere.
Paragraph 10(1) of the proposed new schedule, beginning on line 213, states:
“A direction may require a relevant person to undertake enhanced customer due diligence measures”.
“The direction may do either or both of the following ... impose a general obligation to take enhanced customer due diligence measures”,
and so on. Immediately after that, we read that the direction may,
- “require a relevant person to undertake specific measures identified or described in the direction”.
I do not think that a technical distinction is intended between taking and undertaking enhanced customer due diligence measures. Paragraph 11(2) states:
“The direction may do either or both of the following ... impose a general obligation to undertake enhanced ongoing monitoring”,
11 Nov 2008 : Column 590
and so on. There is scope for tidying this up, in case leaving it at large gives rise, in some later litigation, to a quite unintended distinction and to difficulty.
Lord Thomas of Gresford: My Lords, I shall speak to the amendments in my name. One problem with legislation being produced in this way at a very late stage in the consideration of a Bill is that it is impossible fully to understand its purpose. Consequently, my amendments are largely directed at clarification and are probing. I do not propose to refer to Amendment No. 61AC but, so far as concerns Amendment No. 61AD, I ask the Minister why offences of this nature require jurisdiction throughout the United Kingdom. Paragraph 34 of the new schedule proposed in Amendment No. 61A says:
“Where an offence under this Schedule is committed ... proceedings for the offence may be taken at any place in the United Kingdom, and ... the offence may for all incidental purposes be treated as having been committed at any such place”.
I follow the argument that it mirrors the provisions of Clause 29 in the Bill but I am not sure why it is applicable to offences of this type. I look forward to hearing the explanation.
My next amendments refer to the time limits of summary proceedings in paragraph 35 of the proposed new schedule. Normally magistrates’ courts have limited jurisdiction for six months and sometimes 12 months, but apparently jurisdiction may be claimed in a magistrates’ court,
- “at any time within three years after the commission of the offence, and ... within twelve months after the date on which evidence sufficient in the opinion of the prosecutor to justify the proceedings comes to the knowledge of the prosecutor”.
Why do we require the jurisdiction of magistrates to be extended in this way? Paragraph 35(4) states that,
- “a certificate of the prosecutor ... as to the date on which such evidence ... came to their notice is conclusive evidence”.
In other words, the prosecutor can say, “Well, we didn’t think in this particular month that there was a case but we did in a later month, and that is conclusive. Our view is absolutely conclusive as to when the time runs”. That strikes me as an odd sort of provision, which goes against many of the principles relating to time limits in a magistrates’ court.
With regard to paragraph 36 and my remaining amendments, I question why an officer of a company or of a body corporate should be guilty of an offence not if he or the company does something with his connivance or consent but merely if he is neglectful. Why do criminal sanctions have to be applied and why is negligence brought into the criminal concept in this schedule? I should be grateful for explanations.
Had we had these provisions before us at the beginning of our consideration of the Bill, there would have been no need for these questions to be raised. However, they have been thrown at us at the very end, when we have only Report and Third Reading in which to take stock of what is being assessed. That makes it extremely difficult for us to pass legislation, particularly when it appears to be in breach of some of the principles of jurisdiction and of the time limits to which we have always adhered in this country.
Lord Myners: My Lords, this has been an interesting, helpful and illuminating debate, and I thank all those who have participated in it. I also recognise that there
11 Nov 2008 : Column 591
I start by thanking the noble Baroness, Lady Neville-Jones, for her helpful contribution and expression of support. I have apologised for the lateness with which this legislation has been brought to the House but have explained that we judge it to be a matter of urgency. The point about lateness was also made by a number of other Peers, including the noble Baroness, Lady Miller, my noble friend Lord Harris and the noble Lord, Lord Thomas. I apologise to them as well for the lateness. I also appreciate, however, that the noble Baroness, Lady Neville-Jones, said that she regards this Bill as in some ways the least-worst option as the carrier for this particular legislation. My noble friend Lord Harris made a point about the affirmative order on the Landsbanki freezing and was right to point out that the full wording of the Act was not limited to terrorism but had wider coverage. That is also the case with this Bill.
Baroness Miller of Chilthorne Domer: My Lords, before the Minister leaves the point about lateness, will he comment on the fact that the FATF made the evaluation in June 2007? The Treasury has had over a year.
Lord Myners: My Lords, I was going to come to that issue. I shall do so promptly. The first thing to note is that the UK’s record is among the most compliant in the world on FATF measures. No country is able to satisfy all the FATF conditions but we have a very strong record of achievement in that respect. We have taken action more recently to comply with further FATF requirements, including new money-laundering regulations in December 2007, and we have brought in regulations on politically exposed persons and shell banks. So we have taken action to address some of the areas where the FATF said that we could do better. We wish to be exemplary and lead others in the actions that we are taking.
The noble Baroness, Lady Neville-Jones, asked whether there would be a civil or criminal penalty. Each supervisory body has an established set of guidelines and precedents from the wider money-laundering regulations. They will adopt the same approach here as they are already using in the implementation of those regulations. In particular, they will take into account the nature, seriousness and impact of any non-compliance. Generally, I would expect civil penalties to be applied when a failure to comply is less serious in manner and consequence.
The noble Baroness, Lady Neville-Jones, also asked about the use of the term “appropriate”. This replicates a provision in the money-laundering regulations and will depend on the circumstances of the case. Circumstantial factors that will be taken into consideration include the deterrent effect and the size and capability of the financial resources of a firm that might be in receipt of a civil penalty.
11 Nov 2008 : Column 592
The noble Baroness, Lady Neville-Jones, asked about legal privilege. The approach to legal privilege in the Bill and in this amendment will be carried over from existing money-laundering regulations. Supervisors are open about their policies on handling issues of legal privilege. For instance, the FSA has a number of guides on its website, such as the Decision Procedure and Penalties Manual and the Enforcement Guide Review 2008, which usefully highlight its approach to such issues. Furthermore, enforcement officers will have ready access to legal advice about privilege. The issues of legal privilege raised here are therefore very similar to those that already arise under existing legislation.
The noble Baroness, Lady Neville-Jones, also asked about HMRC and the amendment of its review procedures. HMRC has not yet finalised the order amending its review procedures, so I am unable to say exactly what final form they might take. The order will be an affirmative resolution order, so the House will have an opportunity appropriately to consider it.
I believe that the noble Baroness, Lady Neville-Jones, asked about the functions of the tribunals set out in proposed new paragraph 28(6). These have not yet been transferred to the first-tier or upper-tier tribunal. Until that happens, the Treasury will need to make an order providing for appeals to be made to the existing tribunals.
The noble Baroness, Lady Neville-Jones, raised two other issues on which I shall comment. She asked that we agree to review various pieces of legislation providing for powers to impose financial restrictions and consider the need to consolidate them. I fully agree with the request; it makes considerable sense, and we wish to avoid any situation where there are inconsistencies. We will do that as soon as we can in a manner consistent with doing the job thoroughly and professionally. Finally, she asked whether we wanted further to amend the Long Title of the Bill. I am very happy to give that further consideration.
I am grateful to the noble Lord, Lord Goodhart, for his comments and to the noble Baroness, Lady Carnegy, for her observations on the Delegated Powers and Regulatory Reform Committee. In my short time in Parliament I have come to appreciate the respect and authority which this committee commands among noble Lords. We look forward to seeing the outcome of its consideration of the Bill when it meets tomorrow, and noble Lords will have ample opportunity to take its comments into consideration when the Bill comes back to the House. I apologise to the committee again that it is being placed under time pressure, but I do so in the knowledge, based on everything that I have been told, that it will do a thoroughly professional piece of work despite the time pressure under which we have placed it.
I have already partly addressed the comments of the noble Baroness, Lady Miller. The UK is, as I say, largely compliant with a significant number of the FATF’s measures of effectiveness and among the best jurisdictions. On this basis, only the USA and Belgium scored higher than the UK. She asked why we are acting only now. That is an aspect of the lateness question. There has been a changing dynamic in the FATF. The way in which it is operating means that,
11 Nov 2008 : Column 593
The noble Baroness, Lady Miller, asked whether we will use the powers against Iran. The Prime Minister, in his powerful speech at the Guildhall last night, urged Iran to be part of a world that is addressing the issues of terrorism and to pull away from any actions designed to facilitate the proliferation of weapons of mass destruction. We want that to be the case and will use all our diplomatic resources to secure that objective. At the same time, we recognise that Iran may not choose to do that. If that is the case, the legislation will contain powers that we would be obliged to consider in certain circumstances if the evidence so justified.
| Next Section | Back to Table of Contents | Lords Hansard Home Page |