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Money-laundering and the Financing of Terrorism: EUC Report

My Lords, there is a certain synergy between this debate and the debate with which we started today’s business. I hope that I am able to resist the temptation to repeat myself, not least on the potential for mission creep mentioned by my noble friend Lord Jopling, aided and abetted in much greater detail by my noble friend Lord Hodgson. I start by congratulating my noble friend on chairing the sub-committee which produced this report, and drawing the House’s attention thereto. I must also congratulate him on securing this debate in what, in recent years, has become a remarkably timely manner. I agree with him absolutely that the delays on these reports have been an out and out disgrace, and the usual channels really should have been able to do better. As the report states at the outset, serious organised crime is big business, with a suspected turnover of £15 billion per year in this country alone. I echo the noble Lord, Lord Richard, in asking: who is to say it is not higher? Whatever the figure, the scope for financing terrorist activities is therefore extremely large and a very worrying prospect. The international context of both money-related organised crime, including money-laundering, and terrorist activities means that it is quite right to examine the international dimension to the response to these threats, as the committee report does throughout chapter 2. It should be obvious that the Government’s position is—and ought to be—that serious organised crime often has international drivers and emanates from abroad. It is therefore vital that the Government further international co-operation. Your Lordships’ committee flagged up in paragraphs 190 and 191 of the report at least one area where the Government could do a great deal more: they have not signed the Warsaw convention on money-laundering and terrorist financing. That convention would considerably ease the UK’s efforts to enforce civil confiscation orders. I hope that the Minister will be able to give noble Lords a progress update on whether, and if so when, the Government intend to sign the convention. My noble friend Lord Jopling, in particular, requested that information; I add to that request. Article 47 of the Warsaw convention allows financial investigation units in other member states to request the postponement of suspicious transactions, but for some reason SOCA does not have the power to postpone suspicious transactions based on those requests. It can act only in response to notifications from the regulated sectors in this country. Could the Minister enlighten us as to how the external request procedure operates to bypass that problem? In the Government’s response to the report, we are told that they are still considering their position on Article 47, but that the aim is to sign the convention in the near future. That response was made in October. Could the Minister give some indication of whether, if they sign in the near future, they have thought any more about how Article 47 could be implemented? Are we about to have what I think would be the 14th piece of legislation emanating from the Home Office on crime? The committee also recommended, at paragraph 189, that the Government hasten the ratification of the Convention on Mutual Assistance in Criminal Matters and related protocols. The 2001 protocol to the convention enhanced existing arrangements for mutual legal assistance between EU member states by allowing for the provision of banking information between countries to help combat crime. It has been in force for the UK since 13 June 2006, but I was alarmed to see that it is not in force in five countries. Would the Minister be good enough to both name and shame them? What are the Government doing to encourage other member states to ratify the convention? Will the Minister please tell us the non-EU countries with which the UK is negotiating bilateral asset-sharing arrangements? Of course, that is a rather different matter from the convention which I have just been talking about. All parties agree that, in those areas at least, international consensus is crucial. That point was made forcefully by the noble Lord, Lord Richard. What steps are the Government taking to change the UK’s law enforcement culture to focus on the need for international co-operation? For example, what role do Europol and Interpol play? Do Her Majesty’s Government think those organisations fit for purpose? While the international dimension is important, moves can be made here in the UK which can help to ameliorate the problem. I will focus my comments on the suspicious activity reports regime operated by SOCA. I understand that SOCA has been asked to provide increased levels of case-by-case feedback on suspicious activity reports to the regulated sectors. Some progress has been made in developing the feedback given to those who submit SARs, as they are called, but criticism has been levelled that the guidance provided to the private sector is too general to be of much use. That is problematic, as legislation puts the onus on the private sector to report suspicious transactions. Plainly, large financial institutions and professional advisers are better equipped to respond to the challenge, if only because they have greater resources. However, their smaller counterparts are less able to respond to the demands placed on them. Indeed I have heard complaints that those demands are sometimes unreasonable, for businesses of whatever size. I am not sure what size my noble friend’s brewery is—whether it is an SME. To some extent, SOCA has sought to engage different sectors with sector-specific seminars for banking, insurance, legal and accountancy. In my view, this is a step in the right direction, but more needs to be done. I hope that the Minister will be able to answer some questions on the operation of SARs. For example, has an assessment been made of the contribution that SARs and the broader anti-laundering regime have made to crime reduction, or is this a subject for the Government’s blatant electoral Statement, "Frontline First: Smarter Government", which some of us were listening to just before the start of this debate? Can he also tell the House how the SARs regime is affected by powers in the Counter-Terrorism Act 2008 such as due diligence, ongoing monitoring, systematic reporting, and limiting and ceasing businesses? What steps are the Government taking to maintain the use of SARs across the UK’s law enforcement community? SARs data have been data-matched with various other databases, such as the Joint Asset Recovery Database. Have they been matched with any other external databases? It is plain from the committee’s work that the fight against organised crime and the effort to prevent the proceeds filling the coffers of those who would seek to perpetrate violent outrages is an organisationally complex and technically difficult area. I have asked some questions on the operation of various existing agencies, but I would also like the noble Lord to answer two more general points. First, have the Government assessed whether the economic crisis will result in an increase in money-laundering activity, or how the economic crisis will affect the use of the SARs regime by the private sector? The second point is referred to in the committee’s report at paragraph 223. The current stance of the Government is to refute any claim that there is a link between piracy and terrorism. I note that the committee may not be of a similar opinion. However, is the Government’s view shared by key partners such as the United States, which is particularly concerned about what is happening in Somalia? Does the Minister believe, like the noble Baroness, Lady Garden of Frognal, that there is any attraction or indeed feasibility in the proposal to make the payment of ransoms to pirates an offence, something that might well be usefully considered? All these questions have been prompted by the European Union Committee’s report on money-laundering and the financing of terrorism. I am grateful to my noble friend Lord Jopling and his committee for the opportunity to ask them.