Criminal Finances Bill

Lord Thomas of Gresford Excerpts

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

[Lord Thomas of Gresford (LD)]

My Lords, I welcome the Bill generally but in particular the provision in Clause 15, which inserts a new Section 303Z5 into POCA, giving the court the power to release frozen funds to pay legal expenses. That was a matter I argued many times in this Chamber, particularly during the coalition Government when there was a reduction in legal aid generally. At about that time I had a wealthy client whose assets were frozen and consequently he had legal aid. At the end of the trial, when he was acquitted, he was awarded his costs but, as legal aid had paid his legal team, all he had to pay for were the parking charges for his Rolls-Royce, which he had parked a mile away from the court in case it influenced the jury.

Money-laundering legislation has had a major impact—for business, the cost and time of introducing systems; for individuals, the struggle to prove identity. It is quite something when you have to produce a utility bill not less than a month old to prove who you are to a bank where you have been a customer since the age of 15. You wonder where all this information goes. What happens to it? Who deals with it? Yet, at the same time, as the noble Lord, Lord Hodgson, pointed out, there is a general feeling that prosecutions do not match the considerable efforts and discomforts that we have to suffer. As the noble Lord, Lord Flight, pointed out, compliance is not cheap—£5 billion annually is the cost assessed by the British Bankers’ Association for the way in which banks have to deal with core financial crime.

My experience of the POCA proceedings which occur when a trial is over has not been satisfactory because they are lengthy and complex. I have not been involved in many because, as usual, experts jumped up to capture the market in such proceedings. The reversal of the burden of proof, with the defendant having to prove where the assets came from, was not satisfactory because the trial judge was almost certainly bound by the view of the jury of the facts and the veracity of the defendant. So, from that point of view, it is not a fair procedure.

As the noble and learned Lord, Lord Brown of Eaton-under-Haywood, and the noble Lords, Lord Flight and Lord Hodgson, have pointed out, the figures are not very satisfactory for recovery. They have commented on various years and I will comment on 2014-15 for additional reasons, which I shall point out. In that year, the agency collected £155 million; the National Audit Office reckoned that the cost of collection was £100 million; but—this is the important figure—the confiscation orders made by the courts that were outstanding was £1.61 billion. I call that failure, and the Bill may go a long way towards rectifying the failure that has existed so far.

I was pleased to hear from the noble Baroness, Lady Whitaker, who is a distinguished member of the board of Transparency International. A task force examined the efficacy of money-laundering controls in this country in May 2015 and it came up with important and key findings: first, that the levels of asset recovery in the UK are small compared with the likely amounts of corrupt wealth being laundered; secondly, that only a small minority of suspicious activity reports, SARs, relating to grand corruption are acted on by law enforcement agencies; and, thirdly, that the timeframe moratorium period of 31 days for responding to SARs is generally inadequate to investigate and achieve asset restraint for grand corruption cases.

In July 2016 the Home Affairs Committee was shocked when it heard oral evidence from Robert Barrington, the executive director of Transparency International UK, who said that,

“it seems likely that in terms of money laundering going through the UK system every year, it is at least £100 billion”.

We are always talking about the corruption in Panama, but the committee pointed out that in Panama £100 billion is twice the size of its entire economy. So, given the amount of money passing through the UK system, we are much more involved in money laundering than Panama.

A number of noble Lords, including the noble Lord, Lord Rosser, my noble friend Lady Kramer, and the noble Lord, Lord Watson, a moment ago, underlined another of Transparency International’s conclusions. Mr Barrington said:

“Clearly one of the things that makes the UK attractive as a centre for money laundering is its historic links with the Overseas Territories and Crown Dependencies, because you can move money very quickly to jurisdictions that are very well-linked and for whom your bank of lawyers and accountants will have very close connections and can easily set up shell companies and so on”.


I was interested in what the noble Lord, Lord Faulks, said about that. He believes that legislation is going through the Crown dependencies but I wonder what is happening with the overseas territories.

On the question of corporate liability, the Government are following Section 7 of the Bribery Act 2010. I was involved in the Select Committee that looked at that Bill and afterwards when the legislation went through. I was later asked to give a talk in the premises of a well-known firm of solicitors to some very important clients about the effects of the Bribery Act. I was so shocked to hear other speakers winding up these companies about the amount of compliance that would be required that I thought it necessary to say, “Look, you are not all going to go to prison immediately”. Indeed, of course, under the Bribery Act there is not such a liability as they were saying at that time.

I was at a dinner last night in Threadneedle Street—not a place I go to frequently—where I was sitting next to a young lady who is involved in asset management. She said that the department in her company that is expanding without any obvious horizon is the compliance department. I can see that compliance departments will expand in all these companies and that lawyers will have a new industry of advising people on this Bill which is an effect of the Bill that I would not like to see.

There is much to discuss. The thrust of the Bill is right and I hope that we can refine it in certain important areas.

Criminal Finances Bill

Lord Thomas of Gresford Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 28th March 2017 Lords Chamber

[Lord Thomas of Gresford (LD)]

In support of my noble friend, the experience of POCA has been that the amount recovered has been very little more than the cost, so that the question of resources is very germane. In practice, both sides are anxious to come to an agreement early on to avoid the expense of a lengthy hearing, never mind the lengthy investigation. Therefore, setting the level at a high point is a very sensible thing to do and will ensure that resources are properly used.

[Baroness Williams of Trafford]

Is the noble Lord talking about the high point with regard to the UWO triggering point? The Government have considered all options; they have suggested £100,000. The point was made that £50,000 was more appropriate, particularly in some of the devolved Administration areas, where property prices are generally lower, and the noble Baroness, Lady Hamwee, has made an argument for setting the bar higher. However, my noble friend also made the point that by setting the bar lower we might end up having more success, reaching not only the low-hanging fruit but the high-hanging fruit as well. I therefore hope that the noble Lord accepts that explanation. It is an objective consideration, but there are obviously many views about where the threshold should be set.

On Amendments 2, 5, 7, 16 and 18, tabled by my noble friend Lord Faulks, Amendments 2 and 7 seek to replace the term “holds” with “has a financial interest in” as the test for the High Court to consider. It is only fair that in serving a UWO the respondent must have some direct connection with the property that is of interest. “Holds” is a well-established concept in civil law, including in the Proceeds of Crime Act 2002, and we believe that requiring a person to “hold” property is a proportionate approach. It is also our view that “holding” property includes holding an interest in that property. I hope that noble Lords are reassured by that assessment.

Criminal Finances Bill

Lord Thomas of Gresford Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

[Lord Leigh of Hurley]

My Lords, it may come as a surprise to some, but having carefully researched the matter, I find I have no interests or conflicts to declare in respect of this matter—perhaps sadly.

The financial services sectors of the overseas territories and the Crown dependencies are crucial as global hubs. Our close connections with them contribute to the UK’s position as a global financial centre—which is of course close to all our hearts—and, now more than ever, it is important we maintain and strengthen our ties with key economic partners.

At the same time, as with all financial services, there must be appropriate transparency to prevent abuse by those who would seek to exploit them for criminal purposes, as the noble Baroness, Lady Kramer, has just so eloquently said. It is quite clear to me that the UK is leading the way in this, which is in no small part due to the foundation stones set down by the former Prime Minister, David Cameron, who ensured that the issue of transparency was prominent in the coalition Government, from the time he chaired the G8 summit in Lough Erne and it was at the top of the agenda of that meeting.

That led to the PSC clauses in the Small Business, Enterprise and Employment Bill, on which I spoke quite extensively. Those applied only in the UK, but I recall that the noble Lord, Lord Watson of Invergowrie, commented in Committee that the overseas territories and Crown dependencies were next. Accordingly, I welcome the subsequent commitments made by the overseas territories and Crown dependencies to establish central registers of beneficial ownership—clearly, those territories are listening very carefully to Labour Peers in Committee. Once these have been implemented in June 2017, UK law enforcement will gain access to previously inaccessible information on entities registered in those jurisdictions. That will enable it to investigate corruption and money laundering through BOSS—beneficial ownership secure search systems. These are significant benefits for UK law enforcement, and I am pleased to see the overseas territories and Crown dependencies make strides towards improved financial transparency and integrity. It is an approach that will reap dividends for our law enforcement agencies and their ability to investigate financial crime, while maintaining the positive relations that we enjoy with these territories.

It is right that we should aspire to public registers of beneficial ownership, not just for the overseas territories and Crown dependencies but for all jurisdictions. I welcome the continued government commitment for public registers to be the global standard, as an aspiration. But it is clear we will achieve more by working in partnership and collaboration than by forcing legislation—to the extent we can—on independent jurisdictions with their own elected legislatures. If we threaten that, I foresee that those territories might not continue to co-operate gladly with the UK on issues such as this. We may even take backward steps.

My heart skipped a beat when the noble Baroness, Lady Stern, said that 3 April was an auspicious day: had someone told her that it was my birthday? No, it was because of the Panama papers. Panama is very different. To make the comparison with Panama is a false parallel. Part of Panama’s very different business proposition is a far lower level of financial regulation. The Financial Action Task Force gave Panama the worst rating—non-compliant—for 14 of its 40 recommendations in its most recent evaluation of Panama, one of the worst records for any country in the world.

Law enforcement agencies do not support public registers, as they do not improve their capabilities. David Lewis, formerly of the NCA and now heading the global anti-money laundering standard-setter, the Financial Action Task Force, told the Commonwealth anti-corruption summit last year:

“Incomplete, unverified, out of date information in a public register is not as useful as law enforcement agencies being able to access the right information at the point they need it”.


Tax authorities also do not support public registers, as they encourage people to report less fully and accurately. The OECD stated that for taxpayers to abide by their obligations, they,

“need to have confidence that the often sensitive financial information is not disclosed inappropriately”.

Those multilateral organisations, and the efforts to raise standards globally, are undermined by unilaterally adopting different standards, such as public registers. That is why OECD Secretary-General Angel Gurría said:

“A proliferation of different standards is in nobody’s interests”.


Indeed, much of the United States’ aversion to implementing international standards, as explained by my noble friend Lord Naseby, is the belief that it will lead to pressure to make personal information public. I cannot imagine that that situation will improve much with President Trump in the White House.

The UK rightly wants to raise implemented standards globally, but it cannot do so by undermining multilateral efforts to create a level playing field. We should not impose legislation on independent jurisdictions when financial services are matters for their internal affairs and their citizens have no representation in this House or the other place. Instead, I ask the Government to increase their efforts to raise global standards and make public registers the norm. The overseas territories and Crown dependencies have said that, should that happen, they will comply.

Equally, I am not convinced that we should unduly disadvantage the overseas territories’ economies. Indeed, an amendment such as that of the noble Baroness, Lady Stern, which excludes Gibraltar and the Crown dependencies, may give them an unfair advantage when competing for new investment with the Caribbean overseas territories. There should be a level playing field, but that means the vast majority of major financial centres moving in that direction, with encouragement from international bodies such as the Financial Action Task Force.

However, I encourage the Government to keep this matter under review and Parliament updated. That way, we can return to this issue in due course and assess the effectiveness of the central registers. That is the right thing to do, rather than hypothetically committing to legislation in two years’ time.

[Lord Thomas of Gresford (LD)]

My Lords, the right reverend Prelate the Bishop of Peterborough reminded us that corruption in the modern world is a moral issue—and so it is; perhaps one of the greatest moral issues that we face. I was reminded by the speech of the noble Lord, Lord Naseby, that the great moral issue of the late 18th century and the beginning of the 19th century was slavery. It was the judgment of Lord Mansfield in the 1780s that put an end to slavery in this country.

The anti-slavery movement then began to campaign on the basis that if slavery is abolished in this country, how can it be that we permit it in our colonies, so that when a slave from the colonies comes to this country, the shackles fall away? It took until 1833 for William Wilberforce to lead a movement to pass the anti-slavery Act. Even then, it did not abolish slavery in the East India Company territories or in Ceylon.

However, at that time slavery continued in the United States; it took a civil war to put an end to slavery in the United States. The arguments advanced then were that if we abolished slavery in the colonies and the West Indies, it would undermine the economies of those territories. The same argument again was used: how will those colonies in the West Indies be able to compete with the United States in the production of sugar and cotton if slavery is abolished there?

The important point is that this country laid down the standard. We did not wait for global standards to be brought about; we took the lead. I urge the Government to take the lead, along the lines that have been advanced today by the noble Baroness, Lady Stern, who sees not only the importance of having registers in the overseas territories but that there should be something behind it—the possibility of an Order in Council to deal with that moral issue if they do not take up the cudgels in the way that they should.

[Lord Faulks (Con)]

I have a very short and slightly less theatrical point than the noble Lord’s—although the point he made was good. It relates to Amendment 169, which concerns the Crown dependencies. As at Second Reading, I declare an interest as the former Minister with responsibility for the constitutional relationship between the Crown and the Crown dependencies. It is a relationship of considerable importance to all parties involved, and of particular importance now with the prospect of Brexit. It is important that we maintain the competence of the Crown dependencies and it is also important that we do not exceed our constitutional role, as the noble Lord, Lord Beith, said, in seeking to make laws that in my view are not consistent with the specific constitutional relationship that we have with the Crown dependencies.

I notice that the noble Baroness, Lady Stern, eschewed any reference to the Crown dependencies. Amendment 169 does not, however. Quite apart from the point made by the noble Lord, Lord Eatwell, in relation to subsection (4), I invite the Minister to accept that there is a real problem legally with this amendment and to endorse what I said at Second Reading: that all the Crown dependencies have made very real progress in co-operating to produce a register which is available to all law enforcement agencies.