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Money-laundering and the Financing of Terrorism: EUC Report

My Lords, I am grateful to the noble Lord, Lord Jopling, for securing this debate. I pay tribute to him, as the committee’s chairman, for his commitment and expertise in making sure that the many strands of the inquiry came together in comprehensive proposals. I also echo his thanks to the committee clerk, Michael Collon, and the other staff who offered invaluable advice and help and who served the members of the committee so effectively. The committee was also greatly helped by the specialist adviser, Professor Bill Gilmore, with his knowledge of international law, the law of the seas and research into money-laundering, as well as by the many people who gave evidence. It is important that the Government should find time in the business of the House for noble Lords to hear, read and debate the reports which come from the committees, and to do so in timely fashion, as the noble Lord mentioned. In this, as in other EU inquiries, the committee has had access to a very wide range of people and organisations with unrivalled expertise to offer. The resulting report brings forward analysis and proposals to benefit this country and other member countries of the European Union. The proposals are no less topical than when the report was published in July. Although I shall restrict my remarks to some of the aspects of the report that the noble Lord touched on, I shall also reinforce some of our major concerns in the inquiry. The international standard-setting body is the Financial Action Task Force—FATF—set up in 1989 to combat the growing threat of money-laundering. There were varying assessments of its effectiveness, but it appears to operate as effectively as is consistent with a body which has to deal with matters by reaching a consensus among 34 nations and which now has a more recent counterpart in MONEYVAL. Among member countries, the committee found different interpretations and implementation of decisions, but the ones that we can most influence are the ones for the UK. I shall not repeat the decisions that the noble Lord has mentioned, or the two conventions that this country has failed to ratify, but I shall quote one of the conclusions of the report. It states: ""It is deplorable that negotiations for an agreement on mutual legal assistance, begun nearly eight years ago and concluded over six years ago, should still not have resulted in an agreement which is in force between the EU and the United States"." I should like to press the Minister for a reply on the extensive delay in implementing that agreement and the Warsaw Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism. The Government’s reply included the phrase that they are, ""pushing to increase EU cooperation and information sharing to improve seizure of criminals' assets and to combat money laundering"." We ask: how are they pushing that and what actions are they taking so that implementation is not further delayed? As we were undertaking the enquiry, there were news stories about piracy and demands for ransom from the seas off Somalia, in particular. Those incidents continue today. We have had the recent example of the couple who have been hijacked and ongoing incidents of tankers being set upon by Somalians. When we were investigating that part of the report, we were struck by the, ""sharp contrast between the naval efforts being deployed ... to deter and eliminate the threat from the rise of piracy off the Horn of Africa and the lack of any concerted action to prohibit the transfer of the proceeds of those criminal acts"." The sums of money demanded by the kidnappers are extortionate. The millions still under discussion, I understand, for the British couple there, is a case in point. That is even more true when considering that this is one of the poorest parts of the world, where such enormous amounts of money would be a totally disproportionate force for good—or more probably, for bad, and quite possibly diverted towards terrorist or criminal activities. In pressing for the sources of funding for ransoms and to track payments, we know that things continue to be disrupted in that part of the world. Global trade is suffering significantly. Global trade is itself deserving of international action, because the impact on EU member countries individually, but also on EU trade as a whole, is a highly significant factor in global prosperity and peace. The committee recommended that where payment of a ransom is being assembled in the UK, the authorities should be alerted and consent sought before the money is transferred. We understand that institutions would make a sound judgment about submitting an appropriate report, but perhaps the Minister will comment on how he sees that going forward to ensure that money remains tracked when it is falling into illegal hands. If the public sector carries responsibility for criminal activities, so too does the private sector. We were struck by the evidence that we received from different private sector bodies, and made aware of the cost of compliance with financial services regulation, which may be wasteful and putting the sector at a serious competitive disadvantage. As the noble Lord mentioned, we heard that the Government have offered a review of the money-laundering regulations to establish effectiveness, proportionality and engagement. We urge those three factors to be present in any activity where the private sector has its part to play. It can fully contribute only if it is not hampered by undue burdens of compliance, which seem to be resulting in no useful outcome. One of the factors in EU investigations is establishing clarity of communication, whether through use of a common language with common interpretation and understanding, or in making sense of daunting lists of acronyms and abbreviations. This enquiry was no exception, as can be seen from the four pages of Appendix 5—a very useful appendix—which lists 119 entries in its glossary. The EU must continue to ensure that barriers to communication are kept to a minimum. In summary, global threats such as money-laundering and terrorism can be countered only by international co-operation. The UK's membership of the EU provides us with like-minded partners who share the aim of tackling such crime and the resources to counteract its destabilising effects. We hope that the recommendations in the report will be given due consideration and that further action will be taken on the response that we have already received from the Government. I look forward to the other contributions to this debate and to the Minister's response.