Financial Services and Markets Bill [HL]

Debate between Baroness Bennett of Manor Castle and Baroness Noakes

Report stage
Wednesday 9th September 2026 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I have Amendments 36, 39 and 42 in this group. I thank my noble friend Lady Neville-Rolfe for adding her name to them. They seek to achieve, through slightly different drafting, what the noble Baroness, Lady Bowles of Berkhamsted, sought with her Amendments 35 and 41. In my view, proportionality is the most important of the regulatory principles, and we try to elevate it above the other regulatory principles.

I regret the downgrading of regulatory principles in general under Clause 17, but I am glad that the Government have recognised that they went too far on proportionality and have amendments in this group effectively preserving the status quo for proportionality. We have not achieved an upgrading of proportionality in the regulatory hierarchy, but we have at least protected it from being downgraded.

As the noble Baroness, Lady Bowles of Berkhamsted, said a moment ago, the Financial Services Regulation Committee will now have to bear some of the burden. We will need to make sure that the regulators do not ignore the other important regulatory principles. The noble Baroness mentioned transparency, and I agree with her on that. I also single out the principle that consumers need to take responsibility for their own decisions. The committee will certainly call out the regulator if necessary.

[Baroness Bennett of Manor Castle (GP)]

In the interests of time, I shall focus on my Amendment 38, which appears in this group. It would retain the need to have regard to regulatory principles, which has already been broadly discussed. I will focus on the way in which it specifies the need to have regard to financial crime related to organised environmental crime. However, I must take a second to welcome the comments and commitments from the Government Front Bench to bring some climate components back into the Bill at Third Reading. It is always good to celebrate when campaigning works, and I think we can all hope to reach a time when we do not have to campaign on such environmental basics.

I spoke extensively in Committee about the issues around financial crime related to organised environmental crimes. I shall not repeat what I said then, but I and other careful observers were not satisfied with the Minister’s response. The response from the then Minister was extremely general:

“financial crime and money laundering, whether related to environmental crimes or not, is illegal and something that financial regulators, and this Government, already take extremely seriously. The FCA has a broad remit to tackle financial crime”.—[Official Report, 29/6/26; col. Grand Committee 371.]

That was a very general response that did not address the specific concern about environmental crime and the way in which many other jurisdictions are taking action in this area.

I acknowledge the support I have received from WWF in preparing this response, and I refer to a WWF Themis survey of 644 financial services professionals from 17 countries. It found that almost half the financial institutions sampled operated in high-risk sectors or areas involving environmental-financial crimes, yet more than one-quarter said they did not undertake specific related due diligence. Additionally, 60% of financial institutions surveyed had no land conversion risk policy in place. A 2025 survey of financial investigations units by the Egmont Group identified a lack of alignment of environmental laws with anti-money laundering and anti-terrorist financing standards, and a limitation on their ability to share data or conduct specific activities related to environmental crimes as regulatory constraints. Without explicit recognition of this through the regulatory principles of the FCA and the PRA, relevant actors are not required or equipped to respond with the necessary action. Indeed, in the above-mentioned survey, respondents said that self-regulation is not

“a sufficient driver of change when it comes to land conversion”,

and called it “optimistic” to think that financial institutions would commit to affirmative action with just voluntary frameworks in place.

I note that around the world, FATF recognises environmental crimes as predicate offences for money laundering. The European Union has strengthened its criminal law framework through the environmental crime directive, requiring member states to publish a national strategy on combating environmental crime offences by 2027. As an example from the global south, Zambia’s Economic and Financial Crimes Court, a division of the High Court, recently forfeited to the state a vast array of assets associated with a major illegal lobbying operation. Diplomatic momentum for the fourth protocol of the UN Convention Against Transnational Organized Crime to address crimes against the environment is also advancing, with support from the UK. That is what we are saying internationally, but what are we doing domestically? As a global financial centre, the UK has a specific responsibility to ensure that it is taking effective action against environmental crimes globally and any involvement of our financial sector in those crimes, and can play an important role in achieving a stronger global approach.