Insurance and Genetic Conditions

Steve Barclay Excerpts

Monday 8th January 2018 Commons Chamber

[The Economic Secretary to the Treasury (Stephen Barclay)]

Let me begin by thanking the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) for securing this important debate. As he set out so eloquently, rare genetic conditions such as Huntingdon’s disease have a significant impact on the people and families who are affected by them. The Government are focusing on ensuring that the insurance industry functions well for everyone, including those with genetic conditions. Let me deal with the hon. Gentleman’s final point first by saying that I am of course always happy to meet him to discuss more fully the points that he has aired tonight.

I have listened to what the hon. Gentleman has said, and also to wider representations. Broadly speaking, I can identify three key issues. First, people with rare genetic conditions such as Huntington’s disease can find it harder to access some insurance products. Secondly, when they find an insurance product, it is sometimes not affordable. Thirdly, people with rare genetic conditions are often discouraged from having a predictive genetic test for fear that it would make it harder or more expensive for them to obtain insurance in the future.

It is clear that factors such as age, postcode, occupation and health can all have an impact on the availability, pricing and terms of insurance policies. For example, a pre-existing medical condition, such as Huntington’s disease, can be an indicator that someone is more likely to make a claim. For that reason, insurers will use medical history as a rating factor for some products, which may mean that someone with a genetic condition has to pay a higher premium than someone without such a condition. We must acknowledge, however, that the respective capabilities of insurers to assess risk legitimately, and to price their products accordingly, are a key element on which they compete. I think the hon. Gentleman recognised that at the outset when he said that it was often not easy for insurers to strike the right note in this context.

It would not be right for the Government to intervene in individual firms’ pricing decisions in a way that would damage the competition on which the compulsory competitive tendering relies. I am sure the hon. Gentleman agrees that effective competition is the best way to ensure that the insurance market functions well. While, as he has made clear, it can be harder for people to find cover for rare genetic conditions, it is important to note that there is nothing to suggest widespread exclusion from the insurance market. Furthermore, representatives of the insurance industry have given assurances that, as with all pre-existing medical conditions, insurers will try to offer insurance coverage where they can, based on evidence and backed by medical research.

The Government have made it clear that they consider it important for everyone to have access to suitable insurance. To that end, in 2014 a landmark agreement was established by the Government and entered into with the insurance sector, which led to the expansion of the British Insurance Brokers’ Association’s Find a Broker service. The service was set up specifically to help those who were struggling to find insurance, and last year it was used by more than half a million people.

The Financial Conduct Authority, as the organisation responsible for regulating the insurance industry, has rules requiring firms to treat all customers fairly. The FCA also frequently monitors the sector to track and tackle discriminative practices. It recently closed a consultation seeking feedback from people with pre-existing medical conditions, including cancer. As I am sure many Members will know, people with cancer may find it particularly difficult to obtain insurance cover. The FCA plans to announce its next steps early this year.

It is vital that families living with rare genetic conditions, such as Huntington’s disease, are not discouraged from taking predictive genetic tests for fear of subsequently having problems with getting insurance. That was one of the hon. Gentleman’s key concerns. To that end, in 2014 we extended the concordat and moratorium on genetics and insurance, an agreement between the Association of British Insurers, representing more than 90% of the insurance market, and the Government. That agreement gives clarity and confidence to those taking predictive genetic tests on how insurers treat genetic information. Under the rules of that scheme, insurers are not allowed to ask anyone for the result of a predictive genetic test for any condition, including Huntington’s disease, when they apply for life insurance with a value of less than £500,000. It is important to note that more than 95% of life insurance policies sold in the UK would fall within the protection of that £500,000 cap. That gives confidence to those who wish to take a predictive genetic test, because they can be sure that the results will not negatively influence the price or availability of life insurance.

[Dr Whitford]

Does the Minister not recognise the fact that people end up in the same situation that we had with HIV testing, whereby simply by being tested for HIV—not asked for the results—they were classed as high risk? They had exactly the same issues with mortgages and insurance.

[Stephen Barclay]

The hon. Lady’s point would be a legitimate one if that were indeed the case. However, that is not what the evidence shows. As I have just said, 95% of life insurance policies fall within the cap. Also, we should bear it in mind that the genetic test is often prayed in aid because, although there is a 50% chance of a condition materialising, there is also a 50% chance of it not materialising. The genetic test is therefore often prayed in aid to reduce the risk, rather than having a solely negative use. I think the situation is therefore more nuanced than the hon. Lady’s intervention suggests.

The ABI also provided a report to the Department of Health on its members’ compliance with the concordat and moratorium. I understand that in the last year there was only one complaint, which was subsequently resolved. However, if the hon. Gentleman or any other Member has further evidence of concerns, I would be happy to follow up on any evidence that might be forthcoming.

As a final point, I would like to mention that the Government are also committed to a wider financial inclusion agenda. This will ensure that everyone has access to suitable financial services products. As part of this agenda, we will soon be launching the financial inclusion policy forum. This initiative will address the problem of financial exclusion by driving better co-ordination and engagement across Government and the financial services sector. It has received unanimous support, including from the Financial Inclusion Commission and the Money Advice Trust, and it will be chaired by me and the Minister for Pensions and Financial Inclusion, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman). I hope that the meeting between me and the hon. Member for Paisley and Renfrewshire North following this debate will enable us to—

[Gavin Newlands]

rose—

[Stephen Barclay]

Of course I will give way to the hon. Gentleman.

[Gavin Newlands]

I think that that meeting will prove worthwhile. The Minister seems to be taking assurances from the FCA and the ABI, while the reality of the situation being relayed to me by those who are suffering from Huntington’s is very different from the picture being portrayed by the Minister. I therefore very much look forward to that meeting, and I hope that it takes place at the earliest opportunity.

[Stephen Barclay]

I think we need to differentiate two different points. The first is when the family history is indeed taken into account by insurers, but it is not related to a specific condition. I know when members of my family have had a medical condition that that can affect not only life insurance but a whole range of things, such as travel insurance. Family history is taken into account and that was, to a degree, the substance of the hon. Gentleman’s remarks. That is different from whether those with concerns can have a predictive test, which can cap cover at £500,000, but 95% of life insurance falls within the cap. This is about whether the predictive test is being fettered by the restriction on insurance, and the concordat is there to give comfort to people that they can go ahead and have a genetic test. However, we are happy to discuss that further.

To conclude, I thank the hon. Member for Paisley and Renfrewshire North for securing this debate. Rare genetic conditions, such as Huntington’s disease, have profound impacts on those affected by them. I hope I have been able to provide some assurance this evening that the Government are committed to ensuring that the insurance industry functions well for all consumers, and I look forward to our further discussions as we try to address any further concerns.

Question put and agreed to.

RBS Rural Branch Closures

Steve Barclay Excerpts

Monday 18th December 2017 Commons Chamber

[The Economic Secretary to the Treasury (Stephen Barclay)]

I commend the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) for securing the debate. The strength of feeling generated on both sides of the House by this announcement from RBS is evident from the high attendance at a relatively late hour.

[Ian Paisley]

rose—

[Stephen Barclay]

I will happily give way, but obviously the right hon. Member for Ross, Skye and Lochaber has taken 22 minutes of a 30-minute debate, so time is somewhat limited.

[Ian Paisley]

I appreciate the fact that the Minister has given way, and he is absolutely right to focus on the interest across the House. The leader of the Scots Nats has tonight managed to unite this House—Unionist, nationalist, Conservative and Labour—on an issue that affects all our constituents, from the highlands and islands to the west of Ulster. Many banks are closing. Ulster Bank, which is of course a sister company of the Royal Bank of Scotland, is closing many branches. Is it not time for the Government to put in place a special measure to have a national review of where banks that they own—and that the taxpayer owns—are situated?

[Stephen Barclay]

The hon. Gentleman is right; this is an issue on which many Members of the House from all parties have strong feelings. Indeed, I have been lobbied extensively by many of my colleagues who are in the Chamber this night, including in particular my hon. Friends the Members for Berwickshire, Roxburgh and Selkirk (John Lamont) and for Ochil and South Perthshire (Luke Graham), who have been vociferous in speaking up for their constituents on this issue.

[Luke Graham (Ochil and South Perthshire) (Con)]

As my hon. Friend knows from our representations, we do not believe that the Royal Bank of Scotland is serving our constituents or its customers appropriately. Furthermore, the mitigating factors it is proposing, such as offering digital online services and post office services, do not work in our communities where the broadband is poor and the post offices are too small or insufficient for our local population.

[Stephen Barclay]

As a rural constituency MP, I recognise the importance of bank branches in our communities and, specifically, many of the challenges of travel in rural communities. Of course, RBS will have noted the comments about the staff impact made by the right hon. Member for Ross, Skye and Lochaber, and he will be well aware that RBS has a duty to consult its staff. I expect that it will be keen to respond to him on the specific allegation he made in the House this evening.

[Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

I am alarmed this evening to hear the number of staff who might be made redundant, but I am also concerned about the staff in the remaining branches. There have been six bank closures in my constituency and businesses are contacting me to say that in the local branches they are now going to they are waiting more than 30 minutes to get to the counter. Obviously, there is now a massive impact on the staff in those branches. Does the Minister share my concerns?

[Stephen Barclay]

The reality is that the picture will be more nuanced, because RBS is investing more than £8 million in its branch network this year. It is investing more than £11 million next year. Indeed, it is relevant to point out in response to the concerns raised that customers will often vote with their feet. The right hon. Member for Ross, Skye and Lochaber mentioned Kyle twice. I understand that there is a branch of Lloyds 0.05 miles from the bank that is closing there, and another branch within walking distance of the one that is closing in Aviemore, which he also mentioned.

[Douglas Ross (Moray) (Con)]

We heard earlier that the right hon. Member for Ross, Skye and Lochaber had united the House, and he has, but it would have been nice if he had taken some interventions from Conservative Members, because I think that they might have been helpful. The Minister mentioned customers voting with their feet. Does he agree that it was deplorable of RBS, when it was closing the Forres branch, to tell my constituents to go to Nairn, only for the Nairn branch to be closed by RBS a few weeks later? Surely, that is deplorable behaviour, which no one can accept.

[Stephen Barclay]

As my hon. Friend will know, the decision made by RBS was an operational decision, independent of the Government. It is the RBS board that makes the strategic and management decisions, including decisions in respect of its network. That framework has been endorsed by the Labour, Liberal Democrat and Conservative parties.

[Several hon. Members rose—]

[Stephen Barclay]

I am going to make some progress. The right hon. Member for Ross, Skye and Lochaber has left me only three more minutes in which to do so.

On 4 December, I had a conversation with the Scottish Government Minister for Business, Innovation and Energy, in which he recognised that the branch network decision had been a commercial decision. In its manifesto, written only this summer, the SNP said that RBS should be returned to the private sector and should deliver as much value as possible to the taxpayer.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Will the Minister give way?

[Stephen Barclay]

I will give way one last time.

[Simon Hart]

I shall be very brief. A number of Members of Parliament find it very difficult to engage with RBS and NatWest about closures when they tell us that it is all about footfall—about the number of people who go into their branches. Employees tell us one thing and the banks tell us another. Perhaps the Government would have more influence than us in establishing what the true figures are. Let them mislead Ministers publicly rather than us privately: that would be helpful to all Members.

[Stephen Barclay]

My hon. Friend refers to the true figures. The banking market is changing. As he will know, the use of cash has fallen by a fifth in the past decade. The number of branch visits has fallen by a third since 2011. More than a third of UK adults regularly use banking apps. Three fifths of customers are interacting with their current accounts via mobile apps, and more than 600,000 customers over 80 are registered with internet banking. The House must address the reality that the way people bank is changing, and that trend will accelerate as Open Banking comes on stream in January and FinTech progresses. I know from my recent visit to Edinburgh that a number of additional FinTech jobs will be created. The issue is not whether it is possible to prevent changes in the banking market, but how the impact on RBS customers can be mitigated.

As for the representations made by Members, RBS has given six months’ notice—more than the three months required by the access to banking standard—to hold discussions, in which I urge Members in all parts of the House to engage, about how facilities such as mobile banking can be used to mitigate some of the impacts. One of the key sources of mitigation is the post office network, in which the Government have invested significantly: 7,000 more branches have been modernised in the past three years alone. There are more post office branches than there are branches in the entire network of all the banks combined, and 99% of retail customers and 95% of commercial customers now have access to banking services at post offices. One form of mitigation will be for customers to vote with their feet—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Members must stop shouting. The Minister is just finishing his speech.

--- Later in debate ---

[Stephen Barclay]

I was left a bare eight minutes in which to respond, Madam Deputy Speaker, and I have been generous in taking interventions. I have very little time in which to make some final progress.

At the time of the autumn Budget, recognising the importance of this issue and the concerns expressed by Members on both sides of the House, I wrote both to the Post Office and to UK Finance, which represents banks, to further raise public awareness of the banking services offered by the Post Office and, indeed, to ensure that we receive value for money from the £2 billion that the Government will have invested in the post office network between 2011 and 2018. The Government also introduced the access to banking standard, to ensure that customers are properly notified of the alternatives that are available. It is important for us to use the time that we now have in the six months between this announcement and branch closures to ensure that customers can use other services or use post offices as an alternative.

Help to Save Accounts

Steve Barclay Excerpts

Monday 11th December 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

The Government are committed to supporting people at all income levels and all stages of life to save.

Help to Save is a Government backed savings account to help working people on low incomes build up their savings. They will be able to pay in up to £50 a month and receive a 50% Government bonus on their savings.

Subject to the approval of the House, Help to Save will begin with a trial in January 2018, rolling out in stages to increasing numbers and available to all those eligible from October 2018 at the latest.

Introducing it in this controlled way will allow HM Revenue and Customs to thoroughly test and develop it at every stage so that it provides the best customer experience possible, and a quality service for savers over the lifetime of the scheme.

From January, HM Revenue and Customs will start to invite Working Tax Credits customers into the trial, gradually increasing their numbers, with the expectation that Universal Credit customers will start to be invited in from April. Eligible customers will still have the full five years to register for Help to Save from the end of the trial, and the overall cost of the programme to Government will be the same.

Today regulations will be laid in the Commons which will set out the detail of how Help to Save will operate. The draft regulations were subject to a consultation and a summary of the responses and changes made have today been published at

https://www.gov.uk/government/consultations/draft-legislation-help-to-save-accounts.

[HCWS330]

Terror Attacks: Government Financial Support

Steve Barclay Excerpts

Wednesday 6th December 2017 Westminster Hall

[The Economic Secretary to the Treasury (Stephen Barclay)]

It is a pleasure, as always, to serve under your chairmanship, Mr Davies. I thank the hon. Member for Bermondsey and Old Southwark (Neil Coyle) for introducing this important debate. The House is united in our condemnation of the atrocity that was committed against his constituents and those of a number of other colleagues.

The hon. Gentleman expressed his understandable concern about the number of days taken in responding to the certification of terrorism, and what he perceived to be a delay by the Treasury. To clarify, the Treasury responded to the certificate within 48 hours of its receipt. Clearly the police were focusing on the investigation, and that may have played a part in the number of days that it took for the Treasury to receive that certificate, but the Treasury did respond within 48 hours of doing so.

I am very aware of the impact on businesses in the hon. Gentleman’s constituency following the attacks—indeed, he and I met to discuss it with a number of his affected constituents. As he set out, traders in Borough market have had a number of difficulties, particularly in accessing their insurance payments.

Accessible insurance is vital for businesses and individuals. It protects them financially from life-changing losses and gives firms extra security and confidence when going about their regular business. That is why, in 1993, when the insurance market stopped offering terrorism cover following the IRA attacks, the Government stepped in to establish Pool Re. That move was made to provide reinsurance cover, to stimulate the private market and to ensure that businesses could access protection again. Pool Re is now widely regarded as the global leader in the sector, shaping international standards for terrorism insurance cover. Since its launch, Pool Re has successfully reinvigorated the terrorism insurance market in the UK. Pool Re has also protected businesses, paying out more than £600 million, including for the recent attacks in Manchester, for example. The Government are committed to ensuring that Pool Re continues to protect businesses and enables effective terrorism insurance cover. We regularly monitor Pool Re in that context, and agree that in recent years a gap has appeared in its coverage. That is the legitimate point which sits at the core of the hon. Gentleman’s rationale for calling today’s debate.

The gap means that some businesses may not be insured for a loss of income in specific circumstances, where losses are incurred due to a terrorist attack but there is no physical damage. The lack of physical damage is particularly material in this instance. The Government recognise the need to address that, and I can therefore confirm that we are exploring options, including legislation, and aim to confirm our next steps early in the new year.

We have already shown that we are prepared to take action to modernise Pool Re and to support businesses in the UK. We recently finalised changes to the scheme, meaning that it will include cover for physical damage caused by a cyber trigger. That precautionary measure helps to future-proof Pool Re, and demonstrates our commitment to maintaining the UK’s position at the forefront of those nations reinforcing their economies against terrorism risks. In terms of Government funding in response to terrorism, we are ensuring, across Government, that affected communities have the right support in place to rebuild and recover from such attacks.

[Afzal Khan (Manchester, Gorton) (Lab)]

I thank the hon. Member for Bermondsey and Old Southwark (Neil Coyle) for securing the debate. I am the Member for Manchester, Gorton, and this year we experienced an attack in which 22 people were killed. Manchester then set up the “We Love Manchester” emergency fund in conjunction with the council, which raised millions of pounds. Communities and faith groups provide assistance after attacks, not just the Government and non-governmental organisations—something that will be highlighted in the all-party parliamentary group on British Muslims’ upcoming report on faith as an emergency service. What support is being given to those groups to continue their work, and what is the Minister doing to combat fake charities set up to raise funds after attacks or tragedies?

[Stephen Barclay]

The hon. Gentleman raises a legitimate point. None of us wants to see charities being set up to defraud by exploiting the good will of our constituents in response to such atrocities. He may be aware that the Prime Minister has established a Cabinet Office taskforce to co-ordinate the cross-Government response, to oversee progress and to expedite payments when necessary. She has recognised the issue and is engaged in addressing it.

I am also pleased to confirm that NHS England has made money available to the NHS north region to reimburse it for its efforts in respect of the Manchester attack. Unfortunately, some of the health effects will be long term, as I am sure the hon. Gentleman recognises. That is why another £1.6 million will be made available to provide mental health support for those affected. NHS England has also provided £1 million to the NHS London region for 2017-18 to assist the health system with meeting the costs of the additional mental health support required following the unprecedented level of major incidents that have occurred in London recently, including, of course, Grenfell—a further tragedy that we have debated in the House.

Although we must respond and have responded robustly to the immediate fallout of such atrocities, we must also focus on reducing the terror threat. Cross-Government spending on counter-terrorism is increasing by 30% in real terms from 2015 to 2020, and £700 million has been allocated to counter-terrorism policing this year. Furthermore, the Treasury has provided £24 million of additional funding to help meet costs arising from this year’s terror attacks that have affected police forces.

To conclude, I commend the hon. Member for introducing the debate, and for campaigning on behalf of the affected businesses in his constituency. The Government recognise the issue and are working closely with the relevant bodies to reach an appropriate solution. We always hope that we will never have to deal with yet another atrocity, but we must be prepared so that our communities, and the businesses and individuals who make them, do not unduly suffer from horrific attacks on our democracy.

Question put and agreed to.

Banking Sector: Fraudulent Accounts

Steve Barclay Excerpts

Tuesday 5th December 2017 Westminster Hall

[The Economic Secretary to the Treasury (Stephen Barclay)]

It is a pleasure, as always, to serve under your chairmanship, Mr Hollobone. I pay tribute to the tenacity with which my right hon. Friend the Member for Basingstoke (Mrs Miller) has championed the cause of her constituent, who has clearly suffered from the traumatic case that she rightly raises with the House today. She outlined that she has been working on this case for some time, including exchanging correspondence with Treasury Ministers last year. I welcome the opportunity to update her on the work of the taskforce that was set up, as she correctly said, by the Prime Minister and on developments with the payment systems regulator and others.

To be clear, banks must take action to prevent accounts being used for criminal purposes. The Financial Conduct Authority is responsible for ensuring that firms meet their legal and regulatory obligations. As my right hon. Friend is aware, the FCA is an independent body. That is vital to its role; its credibility, authority and value would be undermined if it were possible for the Government to simply intervene in its decision making.

I will discuss the positive steps that the regulators and industry are taking shortly, but I will first touch on the issue at the core of my right hon. Friend’s concerns. Bank accounts used for fraud and other criminal purposes are a serious concern of the Government, the FCA and the industry, particularly given that authorised push payment scams—the type of fraud to which she refers—are the second biggest payment fraud after card fraud. The FCA’s rules expressly require banks to have systems and controls to counter the risk that they are misused for the purpose of financial crime, including money laundering and fraud.

The money laundering regulations require banks to verify the identity of their customer and to assess the purpose and intended nature of the business relationship when a customer opens a bank account. A key part of the regulations is a requirement to carry out customer due diligence, which was another of my right hon. Friend’s core concerns. Customer due diligence measures mean verifying the customer’s identity on the basis of information or documents obtained from a reliable source that is independent of the customer. As I understand it, Lloyds maintains that when it opened the account, it was applying the “industry-wide acceptable documentation”, but I know that my right hon. Friend has concerns in that regard.

Since my appointment, I have encouraged the industry to consider the use of new technologies where they are as effective or more effective than existing practices. The increasing digitisation of financial services and products means that it is important that customers can prove who they are online. Firms should develop robust tools to ensure that they know who they are dealing with. In essence, there is scope through an electronic footprint to enhance the standard of customer due diligence in the future.

Where a bank assesses greater risk, it may take additional measures, including seeking additional documentation and checking the customer’s source of wealth or funds. Banks must conduct ongoing monitoring, including scrutiny of the transactions undertaken throughout the course of the relationship, to ensure consistency with the customer’s business and risk profile. Banks must also undertake reviews of customer records so that information obtained for the purpose of due diligence is kept up to date.

The FCA is responsible for supervising banks’ compliance with the money laundering regulations and for ensuring that they maintain systems and controls to prevent financial crime more generally. If the FCA finds evidence that a regulated firm has not undertaken due diligence checks, that firm would be in breach of the money laundering regulations. That addresses one of my right hon. Friend’s core questions about who is liable and who enforces the money laundering regulations: it is the FCA’s responsibility to ensure that firms have systems and controls in place to avoid money laundering.

[Mrs Miller]

The point that I made was that when I wrote to the FCA, it said that it did not take on individual cases. The Minister is right to say that it looks at systems and processes, but not at individual cases. I hope he might be able to refer me to who does look at individual cases, because, frankly, I have not worked that out in two years—but he is much cleverer than I am.

[Stephen Barclay]

I will come to some of the steps that are being taken to mitigate that. The key point is whether the standards applied met the requirements of the money laundering regulations or whether there was a loophole. I know that my right hon. Friend has corresponded with the FCA on that point.

As I say, if the FCA finds evidence that a firm has not undertaken its due diligence checks, that firm would be in breach of the money laundering regulations. Where a bank falls short of its obligations, the FCA has shown that it is capable of taking action through multi-million pound fines for two of the largest banks in recent years. At the same time, the FCA must ensure that its supervisory regime is proportionate and efficient and that its unintended consequences are minimised.

I am sure my right hon. Friend will appreciate and recognise that there is a balance to be struck in terms of the level of scrutiny required for due diligence checks. Recently, the hon. Member for Bristol West (Thangam Debbonaire) raised the issue that, at the other end of the spectrum, refugees often experience concerns about their ability to open a bank account because banks ask for levels of documentation that give them the impression that they are being prevented from opening accounts. So the balance is between a proportionate level of due diligence checks and a level that does not stop refugees, for example, being able to legally open a bank account.

My right hon. Friend the Member for Basingstoke also raised the issue of the Payment Systems Regulator, which is leading the work on this type of scam where someone is tricked into making a payment to the wrong account or into paying the fraudster directly. The Government have made it clear that more should be done to stop that happening and to mitigate the harm caused when it does happen. I am pleased to say that progress is being made. The PSR’s ongoing programme of work with industry aims to reduce the risk of the scams occurring and to reduce the damage that they cause. Existing initiatives include better data sharing between banks, a function to enable customers to be sure who they are transferring money to and best practice standards for the reporting of scams. The PSR has outlined milestones for those initiatives to ensure that the momentum is kept up.

Although the PSR accepts that not all scams can be prevented, it has taken a decisive step to align incentives and to reduce harm. It has proposed a contingent reimbursement scheme in which banks would reimburse victims when the banks have not met the required best practice standards, provided that the victims had taken appropriate care when making the payment. That speaks to a further point that my right hon. Friend made about compensation. The PSR’s consultation on that scheme is open until 12 January 2018. The consultation gives a clear sign to consumers that the regulator is on their side, and the PSR will respond to it in due course.

Banks and the FCA must do all they can to prevent fraudulent bank accounts from being opened in the first place, but fraud is a much wider problem. The joint fraud taskforce, as my right hon. Friend mentioned, was set up by the Prime Minister when she was Home Secretary in 2016 as a partnership between Government, law enforcement and the financial sector. The taskforce is working in innovative ways to deliver a more effective response to fraud, including by investing £3.1 million, with industry, in a campaign to improve the ability of people and businesses to protect themselves from fraud; working to understand how even more funds can be returned to fraud victims; pursuing a cross-industry strategic plan on so-called “card not present” fraud; and considering what makes victims susceptible to fraud and how to reduce vulnerability.

The Home Office has asked Her Majesty’s inspectorate of constabulary and fire and rescue services to conduct a review of police response to fraud at a local level, which my right hon. Friend also raised as a concern. The review will assess how local forces deal with demand, assess risk and provide victim care services and will examine the role of the City of London police as the national lead force for fraud.

I thank my right hon. Friend again for raising these issues. The Government recognise the terrible impact of this type of fraud on its victims. There are already strict rules that banks must comply with when opening new accounts, and the independent FCA is responsible for ensuring they do so. The PSR and the industry are doing robust work to tackle all types of fraud, working with the Government’s joint fraud taskforce. The Government will continue to drive appropriate action on these issues, which are so important to all of us in this House.

[Mrs Miller]

I sense that the Minister is drawing to a close. His remarks have addressed the generalities of the banking system, which I understand are hugely important to the regulator and the Government, but may I press him again on particular instances in which individual constituents such as mine have been let down? It is very difficult to see what recourse they have when banks fail to abide by their own codes of practices and rules, leaving them poorer for it.

[Stephen Barclay]

As I understand it, my right hon. Friend draws a distinction between systemic responsibility for the rules of a firm as a whole and responsibility for individual cases, but if I have mischaracterised that distinction, I am happy to write to her. My understanding is that responsibility for firm-wide systems and controls falls to the FCA, but specific one-off cases of fraud are in the police’s remit, so it is for the police to look at individual cases. I am very happy to follow up that point in further discussions.

[Mrs Miller]

May I detain the Minister a moment longer? The problem is that if a bank fails to gather information about a perpetrator of a crime who has opened a bank account, it leaves police unable to follow the perpetrator. Ultimately, it is very difficult for the police to find the criminals if information on their addresses and names has not been collected in the first place.

[Stephen Barclay]

I am acutely aware of the problem that my right hon. Friend raises. Whether the correct information was collected in her constituent’s case is an issue of fact: I understand from Lloyds that it was, but my right hon. Friend may care to differ. Her point about the remit of the police illustrates the reason the Prime Minister asked Her Majesty’s inspectorate of constabulary when she was Home Secretary to review the role of the police in addressing these issues.

All hon. Members recognise how traumatic these cases are. Prevention is better than cure, which is why the industry is taking measures through the PSR. Where fraud occurs, we need to look at how the responsibility of the banks aligns with potential compensation. The PSR consultation is open until mid-January, and I am sure my right hon. Friend will want to contribute to it. We need to look at the balance of responsibilities between the FCA as regulator and banks in individual cases.

I hope my right hon. Friend will be reassured to hear that, partly as a consequence of her tenacity in raising her constituent’s case, the Prime Minister has announced a review of police response and a suite of measures on the FCA, on standards and on the role of the PSR, to ensure that others do not suffer as my right hon. Friend’s constituent has.

Question put and agreed to.

Draft Risk Transformation Regulations 2017 Draft Risk Transformation (Tax) Regulations 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 General Committees

[The Economic Secretary to the Treasury (Stephen Barclay)]

I beg to move,

That the Committee has considered the draft Risk Transformation Regulations 2017.

[The Chair]

With this it will be convenient to consider the draft Risk Transformation (Tax) Regulations 2017.

[Stephen Barclay]

It is a pleasure, Mr Davies, to serve under your chairmanship. The regulations introduce a bespoke regulatory and tax framework for insurance-linked securities business in the UK, completing a process that was announced at Budget 2015.

Insurance-linked securities enable insurers and reinsurers to transfer risk to the capital markets. That is an important and growing part of the global specialist reinsurance market. As of 2017, more than $90 billion-worth of insurance-linked securities have been issued. However, despite the importance of London as a global insurance hub, the rapid growth of the insurance-linked securities market has taken place elsewhere. That is why at Budget 2015 the then Chancellor announced that the Treasury, the Financial Conduct Authority and the Prudential Regulation Authority would work closely with the London insurance market to develop a fit-for-purpose framework for insurance-linked security business in the UK.

The regulations comprise four main elements. First, the regulations provide for UK regulators to apply a new authorisation and supervisory regime for the vehicles that issue insurance-linked securities in the UK. Secondly, the regulations introduce a new type of company called a protected cell company to enable multiple deals to be managed in a single company. Thirdly, the regulations set out the rules for the issuance of securities by protected cell companies, so that the interests of protection buyers and investors are protected. Finally, the tax regulations set out an appropriate and straightforward tax treatment for the transformer vehicles that issue these securities.

The Government are also introducing a new form of corporate body called a protected cell company in these regulations. A protected cell company allows for the efficient management of multiple insurance-linked security deals within a single company, rather than establishing a new vehicle for each individual deal.

The structure of a protected cell company requires each to be held in a cell, with each cell’s assets and liabilities ring-fenced from one another. That type of structure is already common in the insurance-linked securities market but has not been available in the UK until now. The PRA and the FCA will carefully supervise protected cell companies, with the PRA ensuring that each cell is fully capitalised.

The regulations ensure that only sophisticated or institutional investors can be offered insurance-linked securities in the UK and take on this risk. These are complicated financial instruments and it would be wrong for retail investors to be able to purchase them. Finally, the risk transformation tax regulations set out an appropriate and straightforward tax treatment for transformer vehicles that issue these securities in the UK.

To ensure that UK transformer vehicles are competitive and straightforward to use, under the regulations tax is charged at the level of the investor rather on the transformer vehicle itself. For UK investors, tax will be charged as normal, according to their circumstances. Non-UK investors will be taxed according to the rules of their home jurisdiction.

That tax treatment follows the policy aim of the UK’s existing tax regulations for insuring special purpose vehicles, which is set out in the Taxation of Insurance Securitisation Companies Regulations 2007, a document I know you are very familiar with, Mr Davies. The tax regulations we debate today provide for broadly similar outcomes but in a much more straightforward way.

In conclusion, Members have heard that insurance-linked securities are a growing market. Indeed, 2017 has seen record issuance of insurance-linked securities with more than $11 billion-worth in this year alone. It is, therefore, the right time for the UK to improve its offer in this market. The regulations have been welcomed by the industry and by the London Market Group, which represents London’s insurers and reinsurers. I commend the regulations to the Committee.

--- Later in debate ---

[Stephen Barclay]

I thank Committee members for their probing but very interesting questions about the rationale for this policy. The shadow Minister is right to say that we are proud of the insurance industry in the United Kingdom for its global reach and its potential. He mentioned the context of Brexit. These measures were initiated in the 2015 Budget, but Brexit reinforces the benefit of increasing the UK’s influence over this part of the market, which is already well established but is currently conducted offshore. Bringing it within the UK will give UK regulators—the Financial Conduct Authority and the Prudential Regulation Authority—more influence over it than they have under current arrangements. With Brexit, this is the kind of global business that the UK should be competing in. EU insurers already use these vehicles and deals outside the EU. We are discussing a business that is conducted outside the UK from which the UK has the potential to benefit, as opposed to a business that is currently conducted in Europe.

The shadow Minister raised safeguards. It is important to flag that, unlike conventional reinsurers, these vehicles do not pool risk; every deal must be fully collateralised. A transformer vehicle must raise and hold collateral that is at least sufficient to meet its insurance obligations, so an inherent safeguard is built into the design of these products. A further safeguard—it is important to reiterate this—is that the products can be accessed only by sophisticated or institutional investors, so there is no risk of retail investors failing to understand the products on the market.

Several Members raised the issue of tax. It is important to reiterate that the principle behind this tax treatment is similar to the way Lloyd’s members are currently taxed on their syndicate participation, albeit the mechanics of how it is achieved are different because of the different legal characteristics of the entities involved. Investors in Lloyd’s are treated as if they had participated in profit-generating insurance activities directly, rather than through an intermediary—a syndicate. Also, a vehicle cannot qualify for this tax treatment without authorisation from the UK regulatory framework—the Prudential Regulation Authority and the Financial Conduct Authority. That is a further safeguard.

The hon. Member for Aberdeen North, who speaks for the Scottish National party, asked, legitimately, whether any tax would be lost as a result of these measures. I reassure the Committee that the UK will not lose any revenue from this tax treatment, as none of the deals concerned are currently domiciled in the UK. There is already a similar treatment for transformer vehicles in UK legislation—the Taxation of Insurance Securitisation Companies Regulations 2007—but that legislation has been too complicated for the industry to use, so the draft regulations simplify the treatment of those vehicles.

It is also worth pointing out that international competitors already offer a similar tax treatment. Without a competitive and appropriate approach to this tax, the UK would lose out on business that is important to the future of our global reinsurance industry and to our position as a world leader in specialist reinsurance business. That was the shadow Minister’s opening point. As I said, UK investors will be taxed in the same way as they would be if they received interest or dividends from any other company. There is not an issue of lost taxation, because this tax will be applied to entities that are not currently domiciled in the UK.

I hope that I have addressed Members’ questions. I commend the draft regulations to the Committee.

Question put and agreed to.

DRAFT RISK TRANSFORMATION (TAX) REGULATIONS 2017

Resolved,

That the Committee has considered the draft Risk Transformation (Tax) Regulations 2017.—(Stephen Barclay.)

Counter-Terrorist Asset Freezing Regime: April-June 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA-2.010), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolutions 1373 and 1452.

This report covers the period from 1 April 2017 to 30 June 2017. This report also covers the UK implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ) and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU.

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through its Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (Asset-Freezing) Regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

A new EU asset-freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. Once a designation is made under this regime it will appear in the table available online.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373.

The table, available as an attachment online, sets out the key asset-freezing activity in the UK during the quarter.

Annex A: Designated persons under TAFA 2010 by name¹

Individuals

Hamed ABDOLLAHI*

Imad Khalil AL-ALAMI

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Usama HAMDAN

Hasan IZZ-AL-DIN*

Mohammed KHALED

Musa Abu MARZOUK

Khalid MISHAAL

Khalid Sheikh MOHAMMED*

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Entities

Basque Fatherland and Liberty (ETA)

Ejército de Liberación Nacional (ELN)*

Hizballah Military Wing, including external security organisation*

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL)*

Annex B: Persons designated by the EU under Council Regulation (EC) 2580/2001²

Persons

Hamed ABDOLLAHI*

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Mohammed BOUYERI

Hassan Hassan EL HAJJ

Hasan IZZ-AL-DIN*

Farad MELIAD

Khalid Sheikh MOHAMMED*

Dalokay SANLI

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Groups and entities

Abu Nidal Organisation (ANO)

Al-Aqsa E.V.

Al-Aqsa Martyrs’ Brigade

Babbar Khalsa

Communist Party of the Philippines, including New People’s Army (NPA), Philippines

Devrimci Halk Kurtuluş Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party)

Ejército de Liberación Nacional (National Liberation Army)*

Gama’a al-Islamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG)

Hamas, including Hamas-Izz al-Din al-Qassem

Hizballah Military Wing, including external security organisation

Hizbul Mujahideen (HM)

Hofstadgroep

Islami Büyük Doğu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front)

Khalistan Zindabad Force (KZF)

Kurdistan Workers Party (PKK) (a.k.a. Kongra-Gel)

Liberation Tigers of Tamil Eelam (LTTE)

Palestinian Islamic Jihad (PIJ)

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL) (Shining Path)*

Teyrbazen Azadiya Kurdistan (TAK)

¹For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

²For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

*EU listing rests on UK designation under TAFA 2010.

Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2017-11-29/HCWS286/.

[HCWS286]

Counter-Terrorist Asset Freezing Regime: January-March 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolutions 1373 and 1452.

This report covers the period from 1 January 2017 to 31 March 2017. This report also covers the UK implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ) and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU.

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through its Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (asset-freezing) regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

A new EU asset-freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. Once a designation is made under this regime it will appear in the table available online.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373.

The table, available as an attachment online, sets out the key asset-freezing activity in the UK during the quarter.

Annex A: Designated persons under TAFA 2010 by name¹

Individuals

Hamed ABDOLLAHI*

Imad Khalil AL-ALAMI

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Usama HAMDAN

Hasan IZZ-AL-DIN*

Mohammed KHALED

Musa Abu MARZOUK

Khalid MISHAAL

Khalid Sheikh MOHAMMED*

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Entities

Basque Fatherland and Liberty (ETA)

Ejército de Liberación Nacional (ELN)*

Hizballah Military Wing, including external security organisation*

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL)*

Annex B: Persons designated by the EU under Council Regulation (EC) 2580/2001²

Persons

Hamed ABDOLLAHI*

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Mohammed BOUYERI

Hassan Hassan EL HAJJ

Hasan IZZ-AL-DIN*

Farad MELIAD

Khalid Sheikh MOHAMMED*

Dalokay SANLI

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Groups and entities

Abu Nidal Organisation (ANO)

Al-Aqsa E.V.

Al-Aqsa Martyrs’ Brigade

Babbar Khalsa

Communist Party of the Philippines, including New People’s Army (NPA), Philippines

Devrimci Halk Kurtuluş Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party)

Ejército de Liberación Nacional (National Liberation Army)*

Gama’a al-Islamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG)

Hamas, including Hamas-Izz al-Din al-Qassem

Hizballah Military Wing, including external security organisation

Hizbul Mujahideen (HM)

Hofstadgroep

Islami Büyük Doğu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front)

Khalistan Zindabad Force (KZF)

Kurdistan Workers Party (PKK) (a.k.a. Kongra-Gel)

Liberation Tigers of Tamil Eelam (LTTE)

Palestinian Islamic Jihad (PIJ)

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL) (Shining Path)*

Teyrbazen Azadiya Kurdistan (TAK)

¹For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

²For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

*EU listing rests on UK designation under TAFA 2010.

Attachments can be viewed online at: http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2017-11-29/HCWS285/.

[HCWS285]

Draft Banking Act 2009 (Service Providers to Payment Systems) Order 2017

Steve Barclay Excerpts

Tuesday 21st November 2017 General Committees

[The Economic Secretary to the Treasury (Stephen Barclay)]

I beg to move,

That the Committee has considered the draft Banking Act 2009 (Service Providers to Payment Systems) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Robertson. The UK payments infrastructure is the plumbing of our financial system. Every year our payment systems process about 21 billion transactions, worth more than £75 trillion, between businesses and consumers. They underpin almost all commercial activity in the UK and are vital to the day-to-day lives of every member of the public. It is, therefore, extremely important that they are secure, stable and reliable.

In the Banking Act 2009, the Government gave the Bank of England formal powers of oversight over certain inter-bank payment systems, with the aim of promoting the robustness and resilience of key UK payment systems. The Act also gave Her Majesty’s Treasury powers to specify which inter-bank systems are to be overseen by the Bank. The Bank’s supervisory powers enable it to require information directly from the operators of relevant payment systems, and to issue directions or impose requirements on them, when necessary and appropriate.

The order extends the Bank of England’s powers to include oversight of service providers. Service providers can include companies that provide infrastructure and technology—the firms that provide the hardware or software—to the payment systems that enable the 21 billion transactions each year. The responsibility for carrying out the oversight lies with the Bank’s financial market infrastructure directorate, which reports to the Bank’s financial market infrastructure board. The Bank publishes an annual report on the supervision of market infra- structure, which is laid before Parliament. Under the 2009 Act, the Bank has the power to publish principles and codes of practice to be followed by the payment systems operators; require system rule changes; give directions and set standards; and impose penalties for failure to comply. The proposed changes would give the Bank the same powers over service providers. The Bank will publish its approach to oversight of critical service providers shortly, to ensure that it is as transparent as possible.

The legislation will not automatically bring any service providers under Bank oversight. As with payment systems, HM Treasury will specify which service providers to recognised payment systems are to be brought under oversight with an order. HM Treasury can specify only firms that provide services to payment systems that are not already overseen by the Bank for financial stability purposes—that is, systemically important payment systems.

The Act does not require any other criteria to be met for a service provider to be specified. However, when considering a service provider for specification, the Treasury will take into account a number of issues, including the systemic importance of the relevant payment system, the criticality of the service provider to that system and whether the system and the service provider can be substituted. It will also consider representations made by the Bank, the payment systems regulator, the Prudential Regulation Authority, the Financial Conduct Authority, the service provider and the relevant payment systems, as required by the Act.

In summary, the Government believe that oversight should be proportionate to the level of risk presented by a firm. The proposed legislation will give the Government, together with the Bank of England, the tools they need to address any risk and to promote the robustness and resilience of the UK’s payments infrastructure. I commend the order to the Committee and hope that colleagues will join me in supporting it.

--- Later in debate ---

[Stephen Barclay]

If I may first turn to the question posed by my hon. Friend the Member for Windsor about how many service providers would be designated. We do not intend to set a specific number, as this is about the Treasury’s ability to react to risk where that is perceived. It is a question of what is seen as proportionate from an oversight perspective, with regards to the services that those providers pay to those critical infrastructure systems.

On the question asked by the hon. Member for Stalybridge and Hyde about transparency and how we will specify a service provider, a number of factors will be taken into consideration, including the systemic importance of the payment service to which the service provider is providing services; the service provider’s criticality to that payments service; and the extent to which another provider could be substituted in due course. On the issue of transparency, the decision will be taken in consultation with, and on the basis of representations from, the Bank, the payment systems regulator, the PRA and the FCA.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I thank the Minister for giving way and I apologise for being late. This small business commissioner will employ fewer than 50 staff. Will that organisation really be capable of taking on the big multinationals that are likely to be the main miscreants in late payments to small businesses?

[Stephen Barclay]

This is about having oversight to set requirements on what information is needed, and being able to react to risk in a quick and proportionate way. This is a piece of enabling legislation that will allow the Bank to ask those questions of service providers rather than simply rely, as is currently the case, on the payment systems themselves to manage that risk. That is why this is a proportionate response. The order simply switches on a provision that is already in the existing legislation, but it allows the Bank to give force to it. The Banking Act already enables that; the issue is what it does once it is switched on. The order gives the Bank that power, facilitated by the Treasury.

Coming back to the point raised by the hon. Member for Stalybridge and Hyde about transparency, the decision will be taken in consultation with the relevant regulators, including the PRA and FCA, and following representations from the payments systems operators themselves. That reflects our proportionate approach.

In conclusion, the order will enable the Bank of England to oversee service providers to specify payment systems. In some cases those services are critical to the smooth running of our payment systems. The order will support the Bank’s supervision of systemically important payment systems and promote the robustness and resilience of the UK’s financial system.

I hope that the Committee has found this morning’s sitting informative and that it will join me in supporting the order.

Question put and agreed to.

Money Laundering and Terrorist Financing

Steve Barclay Excerpts

Thursday 26th October 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

The UK is one of the world’s largest and most open economies. The Government are committed to tackling the risk of illicit financial flows from money laundering and terrorist financing, and to protecting the UK as an attractive country for legitimate business and a leading global financial centre. As the threats from illicit finance and terrorist financing continue to evolve, so must our understanding of the risks and our response.

Today, the Government are publishing the UK’s second national risk assessment of money laundering and terrorist financing. This 2017 assessment, jointly published by the Treasury and the Home Office, shows how our understanding of and response to money laundering and terrorist financing have developed since the first assessment in 2015.

The key findings of the 2017 assessment are as follows:

High end money laundering and cash based money laundering remain the greatest areas of money laundering risk to the UK. New typologies continue to emerge, including money laundering through capital markets and increased exploitation of technology.

The distinctions between money laundering typologies are becoming increasingly blurred. Criminal funds are progressing from lower level laundering and are being accumulating into larger sums to be sent overseas using more sophisticated methods.

Professional services are a crucial gateway for criminals looking to disguise the origin of their funds.

Cash, alongside cash intensive sectors, remains the favoured method for terrorists to move funds through and out of the UK.

A wide-ranging set of reforms by Government and law enforcement over recent years is still in its early days, but is starting to take effect.

The UK has been at the forefront of recent global efforts to shut down money laundering and terrorist financing. The 2016 London anti-corruption summit led to over 600 specific commitments made by more than 40 countries and six major international organisations.

In 2015, the UK published its first ever national risk assessment of money laundering and terrorist financing. This set out candidly the areas where action was needed. In 2016, the Government published an action plan and committed to the most significant reforms to our anti-money laundering and counter-terrorist financing regime in over a decade.

Many of the actions in this plan have now been delivered or are underway. The Criminal Finances Act 2017 will provide tough new powers such as unexplained wealth orders. The Money Laundering Regulations 2017 bring the latest international regulatory standards into UK law. The publicly accessible register of people with significant control (PSC) was introduced in 2016, and records the beneficial owner of a company, thus improving corporate transparency. Progress continues with reforms to the suspicious activity reporting and supervisory regimes.

This 2017 assessment provides a critical component of continued partnership and prioritisation between Government, law enforcement, supervisors and the private sector.

A copy of the report has been deposited in the Library of the House.

[HCWS200]