My Lords, I speak to the amendments in my name and in those of the noble Lords, Lord McFall and Lord Watson. I declare an interest as chairman of Global Financial Integrity. It is a Washington-based think tank whose purpose is to promote measures designed to limit and eventually eradicate illicit financial flows around the world, in particular those from developing countries, which presently run into hundreds of millions of dollars. It is thought
that they exceed the amount of aid that developed countries contribute to the countries out of which that money comes. I have experience as non-executive director of a banking operation and have advised banks professionally.
Money-laundering, the proceeds of crime and the results of fraud represent a composite picture of international dishonesty, which has been and will continue to be practised wherever those responsible can find a banking system through which to channel the money. This is a fact of life. Many of our banks have such an international scope that they are a ready target for people wanting to use them for these illicit activities.
I invite the noble Lord, Lord Flight, if he has not already read it, to look at the congressional report on HSBC. The chairman of HSBC described it as a very sobering read and concluded that bankers had lost the right to self-determination on such issues. When we come to the part of the Bill that controls how and what people in banks do so that this kind of dishonesty is not furthered, we should err on the side of authority. I invite those advising the Minister to avoid the legislative naiveté I dealt with at Second Reading, or in months to come the Bill will result in many hours of detailed inquiry and comment by lawyers advising banks. The first rule the lawyers will pick up is that that which is not stated in this Bill was neither meant nor intended. The Bill, if it is to restore public trust and avoid the kind of risks I have described in dishonest money transfers, should err on the side of authority.
The amendments I am about to speak to were produced by independent counsel, invited to produce amendments that sought to meet the concerns I and my noble friends have. We played no part in the drafting of these amendments, so let us have a care. If a professional advising us as to the amendments produces this level of authority as being required, what do you think those seeking to protect themselves against it will do in terms of legal expense and inquiry?
My final point before I turn to the amendments in detail is by way of introduction. The noble Lord, Lord Flight, in his usual reserved manner, said, “What about the reckless disregard of regulators in the past of their responsibilities?”. I do not think that we are entitled to repose into the hands of future regulators a degree of confidence that past experience shows would be misplaced. They should be told the scope of how they are to do things and what they are to do because we are talking about bank involvement in criminality.
Amendments 46A and 46B go to the question of strengthening the senior management function—the senior person’s regime—so as to include, with precision and clarity, an obligation on the banking system specifically to deal with the risk of anti money-laundering and of dealing with the proceeds of crime or the results of fraud. There should be no legislative fault in precision and clarity when dealing with criminality.
The amendments seek to ensure that the definition of “senior management function” should be seen to include those areas that I have just mentioned in terms of compliance. Those in banking must comply and must avoid the risk of non-compliance. The FCA, in specifying senior management functions, will require them to do things, including a minimum threshold for
sums to be regulated. Is this too much? It was not thought to be too much in the United States, which has a far bigger banking system than ours. Would it run a risk of damaging our banks? It has not in the United States. It is ours that have suffered the penalties, not theirs. These amendments seek to establish a norm—not some Anglo-Saxon aberration—for proper cross-border behaviour in the banking world.
Your Lordships will note that Amendment 46A uses the words, in proposed new paragraph (b)(iii),
“related to or resulting from”.
In other words, it gives a broad reach to responsibility. Amendment 46B makes specific reference to the statutes that have to be borne in mind. It is hardly a criticism to be met to say that people must obey the criminal law—of course they must. This statute—the Bill and the amendment—remind people in statutory wording of their civic obligation, as well as their professional obligation, to obey the law. It is designed to stop the defence of, “Nobody told me. It was not my job”. The two amendments are straightforward and build on the Government’s well deserved intention to improve the law.
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Turning to the issue of senior persons, I was surprised that the Minister stated that Amendment 47A might result in the unintended consequence of drawing into the line of fire junior staff when a senior should be responsible. In fact, the risk we asked counsel to deal with was exactly the opposite—the risk of senior people using juniors as an escape route by a system they devised. That is exactly the opposite of the interpretation put upon it by the Minister.
The amendment is designed to avoid the money-laundering reporting officer being the only one to carry the can: it includes his superiors as well, hence the words in the amendment,
“all persons responsible for management of persons”.
We do not want the courts littered with trials about superior orders and tuppeny-ha’penny defences based on statutorily loose language.
I turn, finally, to the question of standards of behaviour and rules of conduct. The amendments concerned are Amendments 53A, 53B and 54A. The point I wish to make by way of introduction—again meeting something that was said by the noble Viscount, Lord Trenchard, and the noble Lord, Lord Flight—is that in London we are dealing with international banking. We are inviting rules to be observed by not only British citizens but foreign workers in our banks, who are expected to observe and apply our laws. Under these amendments the FCA and the PRA must make appropriate rules in relation to statutory responsibilities. The rules must be designed to avoid the risk of participation in such crime.
I have taken some time on this because out there, despite all the technical stuff we talk about in certain debates, the one thing the public will expect out of the Bill is that it will contain provisions designed to restore trust, domestically and internationally, in our banking system. To suggest that these amendments are unnecessary is naiveté. They are necessary. There is no loss to their
intent by inclusion but there is much to be gained. I ask the Committee to look at these amendments with favour.