Money Laundering: British Banks

– in the House of Commons am 12:34 pm ar 21 Mawrth 2017.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of John Martin McDonnell John Martin McDonnell Shadow Chancellor of the Exchequer 12:34, 21 Mawrth 2017

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on allegations of money laundering against British banks.

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

We want our financial institutions to lead the way in the global fight against money laundering. This is not only a question of financial crime, with illicit finance used to fund serious organised crime groups, as well as terrorist organisations; this is about keeping our citizens safe. That is why the Government are going to do what it takes to prevent the practice and pursue anyone who might seek to abuse our financial system.

The Financial Conduct Authority and the National Crime Agency take any such allegations seriously and will investigate closely whether recent information from The Guardian newspaper—or, indeed, any other media source—regarding money laundering from Russia would allow the progression of an investigation. Beyond that, we need to ensure that sophisticated criminal networks cannot exploit our financial services industry.

This Government already do more than any other to tackle the global threat of money laundering. Since 2010, we have seized £1.4 billion in illegal funds and put hundreds of millions more beyond the reach of criminals. We have set up the Panama papers taskforce and we hosted the global anti-corruption summit last year. Now, we are preparing the most significant changes to our anti-money-laundering and terrorist finance regime in over a decade. We are strengthening the rules to put the UK at the forefront of international efforts to crack down on money laundering, with new regulations coming into force by the end of June. We are also bringing in a landmark piece of legislation in the form of the Criminal Finances Bill. That will allow banks to share more information than ever to help to uncover money laundering. It will also give law enforcement agencies new powers to bring criminals to justice.

However, domestic changes alone are not enough in a world of global criminal networks, which is why we are working closely with our international partners to stand up to this threat together. Work continues apace in groups such as the G20 and the Financial Action Task Force, whose membership includes all the world’s leading financial centres. We have led the way in getting more than 90 countries to exchange data on offshore accounts and to uphold the global standard of tax transparency. We are determined to make the UK the most difficult place in the world for international crime networks to channel their finances through, and we will not relent in our efforts to do that.

Photo of John Martin McDonnell John Martin McDonnell Shadow Chancellor of the Exchequer

I hope that the Minister recognises the immense gravity of the situation that we are facing, because I believe that his statement reflects complacency on the part of the Government. Let me go through the allegations, which are of the deepest concern. First, it is alleged that, via an operation referred to as the “global laundromat”, banks based in Britain have been used to launder immense sums of money obtained from criminal activity in Russia linked to the FSB spy agency there. This appears to point to an overwhelming failure of basic management on the part of the banks. One of those banks, HSBC, is an institution that has previously faced money laundering charges in the US and across the globe. The direct intervention of this Government helped to block a 2012 US investigation on the purported grounds of its potential risk to financial stability. Money laundering through London and elsewhere threatens the stability of our financial sector and our economy.

In the case of another bank, RBS, the Government directly own a 72% stake. A third bank, Barclays, has been under investigation for its role in LIBOR rigging. Will the Minister give us specific details of what steps are being taken to address this scandal? Can we have an assurance that there is the potential to open criminal proceedings to break up what is effectively a criminal network? Will the Government also undertake that they will not—as they have in the past with HSBC—attempt to intervene in criminal or other investigations taking place elsewhere in the world? The major risk to financial stability is not from investigations intended to clear out criminal activity from our banking system; it is from inactivity on the part of the Government and others, and from failing to act to ensure that our major banks are clean and fit for purpose.

Secondly, all those banks claim to have strict internal policies to deal with money laundering. The Financial Conduct Authority places great stress on the need for banks to self-police and create appropriate internal procedures to prevent money laundering. It is obvious from today’s revelations, however, that the current arrangements are not working to prevent widespread, organised and sophisticated criminal activity. Will the Government tell the House what steps they will be taking to address this matter with the FCA? Will the Government today commit to opening an inquiry with a view to reporting rapidly on measures to be taken that will strengthen the regulations, including introducing tighter controls on and closer monitoring of the banks themselves?

Finally, when the Government own major stakes in the banks involved—RBS in particular, since they are no longer able to sell off that stake—there is an immediate need for them to reassure taxpayers that publicly owned banks are not indirectly involved in criminal activity. What steps will the Government, as a major shareholder in RBS, take to investigate the allegations against it and to reassure taxpayers? Our banks have been found wanting yet again. Urgent action is needed from the Government to protect the standing of our finance sector and to protect our economy. Complacency and inaction are not good enough.

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I assure the right hon. Gentleman that the Government are far from complacent. As I outlined earlier, we have been updating the UK’s money laundering regulations, and I hope that the Criminal Finances Bill, which is currently in the other place, will receive Royal Assent in the near future, creating new powers for enforcement agencies. The FCA takes misconduct seriously and fined Deutsche Bank £163 million only last month. As for whether we should be telling the independent FCA or the NCA what to do, it is worth saying that if the information reveals new findings, the FCA will able to investigate accordingly. It would not be appropriate for me to comment on potential legal proceedings.

Photo of Desmond Swayne Desmond Swayne Ceidwadwyr, New Forest West

Does the commitment expressed in our hosting of the anti-corruption summit not a year ago still exist to drive forward its agenda?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

Absolutely. This Government are fully committed to ensuring that taxpayers are fully protected and that we do all we can to stamp out illegal money laundering activity.

Photo of Roger Mullin Roger Mullin Shadow SNP Spokesperson (Treasury)

This revelation is shocking, but it is not in the least bit surprising. For over a year, I have been campaigning in this House on associated areas. After the story was released yesterday evening, I undertook research that indicates that at the heart of the issue is the banks’ use of limited partnerships—not only Scottish limited partnerships, but many other forms—that allow the criminals to hide their ownership of companies. It is through that mechanism that these things are happening.

I have several questions for the Minister. First, the Department for Business, Energy and Industrial Strategy closed its review of limited partnerships on Friday. Will the Government allow me and other interested Members to resubmit to the review, although it is formally closed, so that we can raise this important matter and have it considered in the review?

Secondly, when one looks at the outcome and the extent of the situation, it is too much to believe that we are the world leader in money laundering regulation in general, so it is time for another look at that. Thirdly, a key concern of many in the House is that the banks have not had a supportive whistleblowing regime in recent years. We need to encourage, not inhibit, whistleblowing.

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

In this alleged case, my understanding is that the bodies used were limited companies, not limited partnerships. Last year, BEIS introduced the register of people with significant control, and we will be consulting shortly on UK property-owning foreign companies. That is a step forward.

The hon. Gentleman mentioned the limited partnership consultation; I am sure that any right hon. or hon. Member who wants to write to the Secretary of State for Business, Energy and Industrial Strategy can do so. It is also appropriate to say that we are world leaders in financial regulation. The FCA does a good job, is held in high regard by the rest of the world and strikes the right balance between consumer protection and fairness.

Photo of David Rutley David Rutley Ceidwadwyr, Macclesfield

My hon. Friend takes this issue seriously. Will he tell the House how unexplained wealth orders will prevent criminals from using the proceeds of crime in the UK?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

My hon. Friend raises an important part of the Criminal Finances Bill, which is going through the other place as we speak. I look forward to its receiving Royal Assent and becoming law, giving new law enforcement powers to stop any of this activity.

Photo of Angela Eagle Angela Eagle Llafur, Wallasey

The Economic Secretary has shown real complacency about the huge and building scandal that has been revealed by The Guardian today. Given that our banking sector is very large and that the consequences of its being destabilised by such criminal behaviour are very serious for our economy, does he not realise that his complacent, process-driven answers today are simply not good enough?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I do not recognise that at all. The FCA and the NCA are well placed to investigate this, if appropriate. We have not only world-leading financial regulation but world-leading financial services. More than 1 million people across the country are employed in financial services in all our constituencies, and the vast majority of them work hard, do a good job and represent customers as well as they can. We have outlined the measures that the Government are undertaking—[Interruption.] I have addressed everything that Ms Eagle mentioned. This Government are doing more than at any time in the past 10 years to tackle this issue.

Photo of Rishi Sunak Rishi Sunak Ceidwadwyr, Richmond (Yorks)

Given the overlap between money laundering networks and terrorist financing networks, does my hon. Friend agree that this is also an issue of national security and that, furthermore, the only way we can tackle it is with greater information sharing between the private sector, regulatory bodies and enforcement agencies?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

My hon. Friend is absolutely right. Greater information sharing and transparency are the way forward. The register of people with significant control is an important step forward, and I look forward to additional transparency in the future. Ultimately, people with nothing to hide have nothing to fear.

Photo of John Mann John Mann Llafur, Bassetlaw

To counter the impression that he has been promoted beyond his competence, can the Minister tell us which British banks have been convicted of money laundering over the past five years? What specific, individual thing has he learned from reading those judgments? [Interruption.]

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I can tell John Mann that the FCA has carried out a number of enforcement actions, both large and small, over a large number of different financial services. It is right and proper that a balance between fairness and responsible behaviour is struck at all times.

Photo of Jake Berry Jake Berry Ceidwadwyr, Rossendale and Darwen

If these allegations are proven, particularly against a bank in which the Government own a majority stake, will my hon. Friend commit to using the full powers of the Criminal Finances Bill to clamp down on this type of money laundering, which, if proven, will be a national disgrace and scandal?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

It is worth saying that our shareholding in a number of banks is at arm’s length. We are not operationally in control, as is right and proper. The important thing is that we learn lessons from the past and make sure that the past is not repeated.

Photo of Helen Goodman Helen Goodman Llafur, Bishop Auckland

Has the Minister discussed the matter with the former Chancellor, Mr Osborne, who the US House of Representatives found intervened with the American authorities to prevent HSBC from being prosecuted in 2012? What has the FCA specifically done since the “global laundromat” was discovered in 2013?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I have not had that conversation with my right hon. Friend. It is fair to say that the FCA has carried out a number of investigations, and it is right and proper that it does so. The FCA is an independent operational body that we set up as asked, and it would not be appropriate for me to comment.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

It seems to me, and to many others, that there is an unwritten deal here: that Russians and others of dubious or illegal means can essentially come to this country, send their kids to our schools, buy our real estate or our sports clubs and get involved in this country on the basis—this is the other side of the deal—that they do no wrong while they are here. That is not an acceptable way forward, if it ever was. Is it not now time to rethink this issue?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

My hon. Friend raises an interesting point. This Government are doing more than ever before to tackle this important issue. When it comes to money laundering, the Department for Business, Energy and Industrial Strategy has called for evidence on the use of limited partnerships, which were raised by Roger Mullin, and will in due course consider any action needed to address those concerns.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Education)

To a long list of misdemeanours committed by the banks for which directors have not been held responsible, we now have this allegation of extensive laundering of funds that were either stolen or of criminal origin. One of the explanations that has been given is that directors of banks see compliance as an expense with no return. Can the Minister assure us that the allegations will be properly investigated by criminal investigators and that, if it is found that directors have encouraged slack compliance for the profit of their bank, they will feel the full weight of the law and realise that slack compliance has a cost in their personal lives?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

The hon. Gentleman is absolutely right that in this country we have not only a world-regarded financial regulation system but a rule of law that is both fair and effective. If there is any wrongdoing or impropriety, it is right and proper that those people face the full weight of the law.

Photo of Philip Hollobone Philip Hollobone Ceidwadwyr, Kettering

How many money launderers have been sent to prison in the past five years?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I am not aware of the exact answer to that question, but I will write to my hon. Friend with all the information I have. I am convinced that, across the world and in this country, money laundering is taken very seriously.

Photo of Ben Bradshaw Ben Bradshaw Llafur, Exeter

Are the Government or any other public agency in Britain investigating whether laundered Russian money was channelled to any individuals in either the leave campaign or the Trump presidential campaign? Is the Minister aware of any other investigations?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I make it clear that I am not aware of any connection. It is right and proper that the FCA and the NCA have been watching that issue for some time. It is a confidential matter; if there is new information, I am sure they will consider it.

Photo of Alan Mak Alan Mak Ceidwadwyr, Havant

Compliance officers across the banking sector play a key role in stamping out some of the behaviour that has been reported. Will the Minister assure the House that the FCA and other regulators are making sure that compliance officers are properly trained and are proactive on the ground?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I reassure my hon. Friend that that is the case. It is right and proper that the issue of money laundering is addressed from top to bottom. Everyone has a responsible part to play.

Photo of Catherine McKinnell Catherine McKinnell Llafur, Newcastle upon Tyne North

Having previously claimed that

“there is little evidence of corporate economic wrongdoing going unpunished”, the Ministry of Justice is now considering whether it should extend the criminal liability offences to money laundering. Does the Minister now agree that the “global laundromat” allegations clearly highlight that the law needs to be toughened up in this area?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I am sure that the MOJ will listen carefully to the hon. Lady’s point.

Photo of Antoinette Sandbach Antoinette Sandbach Ceidwadwyr, Eddisbury

The report indicates that many of the laundered funds went into shell companies. Can the Minister explain how the world’s first open register of equitable ownership will help prosecuting authorities to bring to justice those who benefit from such funds?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

The people with significant control register is open for everyone to see. Thousands, if not millions, of people are able to see it. Transparency is absolutely the best thing to make people aware of wrongdoing and to make sure that nothing is hidden.

Photo of Greg Mulholland Greg Mulholland Democratiaid Rhyddfrydol, Leeds North West

It is clear that the current measures, though welcome, are simply not sufficient to tackle this sort of money laundering. Considering that dirty money is channelled through our British banks, how much worse would it be if the Chancellor achieved his vision of this country becoming a corporate tax haven—another Panama—post-Brexit?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

That is not the Chancellor’s vision. The Government are currently consulting on the fourth money laundering directive. I have mentioned the Criminal Finances Bill, which is in the other place. The FCA is also vigilant in enforcing measures, and it takes misconduct very seriously.

Photo of David Nuttall David Nuttall Ceidwadwyr, Bury North

Having witnessed at first hand the anti-money laundering procedures of UK banks, when I tried to keep open an existing bank account, I wonder how any organisation has managed to launder ill-gotten gains through our banks, and I can only conclude that it is because complying with the regulations is seen as no more than a tick-box exercise. Does my hon. Friend agree that banks should adopt a more proportionate and common-sense approach when dealing with members of the public?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

My hon. Friend will be pleased that the fourth money laundering directive, which the Government are consulting on as we speak, includes provision for a more proportionate approach to that very issue, and I hope he takes part in the consultation. I also hope that the banks, with FCA guidance and a Government steer, will have to take a proportionate approach in the very near future.

Photo of Ian Austin Ian Austin Llafur, Dudley North

The Home Affairs Committee estimates that £100 billion is laundered through London every year, but only 0.17% of that has been frozen, so the Minister might as well go to Heathrow and put up a welcome sign for Russian murderers and money launderers. Five criminal complaints have been submitted to UK law enforcement agencies about money laundering connected to the Magnitsky case. Not a single one has resulted in the opening of a criminal case, whereas 12 other countries have opened investigations on the same evidence. So the question is this: what is necessary to get UK law enforcement agencies to do their jobs and prosecute money launderers? Why has that not been working, and what is the Minister going to do about it?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I hope the NCA and the FCA would, if appropriate, do a considerable amount about it. They are independently operational bodies. It is right and proper that I cannot comment at the Dispatch Box about what may or may not happen. However, if there is wrongdoing, it is right and proper that it is addressed.

Photo of Alan Brown Alan Brown Scottish National Party, Kilmarnock and Loudoun

As we have heard, HSBC has been a serial offender on money laundering all around the world. It has had fines in the US and in Switzerland, and it has been mentioned again. There were calls for an investigation into other banks in 2012. The Laundromat scheme was first reported in The Independent in 2014, so yesterday’s news is not actually new news; it just shows the scale of the problem with people using British banks and shell companies registered in the UK. If the UK really is a world leader in money laundering and other financial regulation, how bad are things in the rest of the world, and what is the UK doing to help stamp out the problem elsewhere?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

The hon. Gentleman raises an interesting point. It is important to co-operate with countries around the world. We have been very clear that we will work with the Financial Action Task Force and other regulators around the world, and that is important. This is not something we can solve domestically on our own.

Photo of Kerry McCarthy Kerry McCarthy Llafur, Bristol East

Investigators at the National Crime Agency are saying that Russian officials have been hampering their investigations by refusing to co-operate. What discussions has the Minister had, or will he have, with his Foreign Office counterparts to see whether they can broker a better relationship with those Russian officials?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I would imagine that the FCA is in contact with the Foreign and Commonwealth Office, and, if appropriate, they will have conversations about this issue. What is important is that, if these allegations are correct, and any new information is presented, the NCA and the FCA act on it appropriately.

Photo of Rushanara Ali Rushanara Ali Llafur, Bethnal Green and Bow

May I ask why the Chancellor is not here, because, frankly, the Minister’s answers today have been appalling? Some £80 billion could have been laundered, according to this story. Should we not think again about the powers the FCA and other regulators have to prevent these things from happening? Can he please answer some questions?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

I am very sorry, but I have been doing my very best to answer the questions that have been asked. Sadly, I cannot be held responsible for the quality or the content of the questions. What I would say is that I am the Minister responsible for financial services, and the Government are responsible for legislating in this place and in the other place. To answer the hon. Lady’s question, the Criminal Finances Bill is an example of what we are doing now, as we speak, to improve things. The FCA is in constant dialogue with not only the banks but the Government to make sure it moves with the times.

Photo of Catherine West Catherine West Shadow Minister (Foreign and Commonwealth Affairs)

If it is found during the investigation that terrorism has been facilitated, what personal responsibility will the Minister take for that dreadful finding?

Photo of Simon Kirby Simon Kirby The Economic Secretary to the Treasury

It is important to say that these schemes operated from 2010 to 2014. Alan Brown mentioned that The Independent first raised the story in 2014. However, if there is new evidence, it is important that the NCA and the FCA look at it and act accordingly. We set up those bodies to act operationally and independently from Government, and that is right and proper.