Asked by
To ask His Majesty’s Government what further consideration they
have given to the impact of Anti Money Laundering Regulations on
Politically Exposed Persons.
The Parliamentary Secretary, HM Treasury () (Con)
My Lords, the recent review of the money laundering regulations
concluded that there is still work to do to better understand the
risk profile of domestic politically exposed persons—PEPs. It is
crucial that the Government fully explore and understand any
potential consequences of changing requirements on domestic PEPs
before making any amendments to the UK’s anti-money laundering
regime. This work is ongoing and part of the Government’s wider
economic crime strategy.
(Lab)
I thank the Minister for that Answer, but I am afraid that I do
not understand it. On 5 July, she said that the review had been
concluded and that no change was needed, despite all the evidence
that she has had from Members of your Lordships’ House. Unbeknown
to us but very helpfully, after that, the Lord Speaker wrote to
the FCA on 21 July. However, the FCA’s reply on 15 August simply
repeated that firms should act proportionately in dealing with
PEPs. Two hours ago, we all received a letter from the Minister
which says: “It cannot be acceptable that Parliamentarians and
their families are denied access to personal finance.” However,
as we will hear from the noble Lords, Lord Vaizey and Lord
Kirkhope, and others no doubt, banks are still refusing to handle
accounts of their family members, and other colleagues of mine
are finding that their accounts are being closed. The system is
not working. Can the Minister agree to meet me and other
concerned Members of your Lordships’ House, together with the FCA
and HMT officials, so that we can make progress? Clearly, led by
itself, HMT is unable to do so.
(Con)
I would be very happy to meet with the noble Baroness and other
interested Peers to see what more we can do. I will clarify one
point. The review of the money laundering regulations concluded
earlier this year. One of the outcomes was that there was more
work to do to better understand the risk profile of domestic
PEPs. That work is ongoing. When we have a better understanding
of the risk profile and any potential consequences of changing
the classification of domestic PEPs, we will take our work
forward accordingly. In the meantime, it is important that people
are treated fairly by the financial institutions that they work
with. We have included a list of points of contact for some of
the major banks so that people who are having problems can
receive help where it is needed. If Members have issues, I
encourage them to make use of the Financial Ombudsman Service, if
they need to, as a route to address any problems.
(Con)
My Lords, I thank my noble friend the Minister for her letter,
which clarifies the current position to some extent. As one of
those who was involved for a long time in drafting these
regulations in Brussels, it was absolutely required that we
should put “proportional” into them—unusually for regulations in
Brussels. Can the Minister do more to force the FCA and the
financial institutions to take some notice of that
proportionality? Can we please make sure that this indiscriminate
application to public servants—and their families, including my
own—of draconian measures can be put aside, and that we can take
a sensible and proper view towards anti-money laundering
arrangements?
(Con)
I absolutely agree with my noble friend on the importance of that
word and of a proportionate approach being taken in the
implementation of these regulations. I know that concerns have
been raised in the past. We have convened previous meetings with
the FCA and the banks to make this message known to them.
Hopefully, the points of contact that we have provided will
provide a further remedy to any noble Lords who are affected. We
are also looking at the broader system to see whether we can
change the designation of domestic PEPs. However, we need to look
very carefully at this and take our time to make sure that we do
that work properly.
(LD)
My Lords, the FCA guidelines, which are five years old, make
clear that Members of this House should be treated as low risk
unless there are other factors at play. There is no point to
these guidelines if they are not being enforced. What assessment
have the Government made of the FCA’s record on enforcement of
the guidelines? Have any sanctions ever been imposed on those who
break them?
(Con)
My Lords, as I have said, we have had an ongoing dialogue with
the FCA around the guidelines. In turn, they have had engagement
with those that they regulate. I do not have any statistics for
the noble Lord on enforcement action. However, one area where we
have some statistics is that, since 2018, the Financial Ombudsman
Service has received fewer than 10 complaints in this area. That
is not to say that people have not experienced problems, but I
would encourage them to use the points of contact and, where they
are experiencing problems, to advance those complaints, so that
we can have better data with which to assess the impact of the
issue.
(Con)
My Lords, I have used my noble friend the Minister’s point of
contact. My son was refused an account with Starling Bank. I got
through to a senior executive there, who stated to me very
clearly that: “It is our policy not to give accounts to the
relatives of Members of the House of Lords.” That is about as
clear a breach of the regulations as you could have. Will the
Minister use her convening power to collect in one room the
banks, the FCA and Treasury officials? Let us sort this out and
introduce some common sense.
(Con)
I cannot comment on an individual case, but I can be absolutely
clear with my noble friend that the FCA has been clear that
designation as a PEP should not be a reason to end a business
relationship. I said to the noble Baroness, Lady Hayter, that I
am very happy to have a meeting, and I will use all the efforts
of my convening power to bring to the table those I cannot
directly commit to attending the meeting today.
(Lab)
My Lords, the Minister has said on two or three occasions that
great care is needed in any review of the regulations, despite
the fact that it is quite clear that the FCA guidance is not
being followed by a number of banks. What is this huge amount of
work that still needs to be done before we see a change in the
regulations?
(Con)
My Lords, there is a difference between looking at the FCA
guidance and whether it is being properly adhered to and whether
that could help solve the problem that noble Lords are talking
about. We have made continuous efforts to look at that but, given
the wider sentiment we have heard in this House, we also want to
look at whether we can make a more substantive change to how
domestic PEPs are regulated. That is a wider piece of work that
could have unintended consequences, so we need to look at that
carefully.
(Con)
My Lords, what was the point of us leaving the European Union to
take back control if Ministers cannot direct the FCA to show a
bit of common sense? I declare my interest as chairman of a
bank.
(Con)
My Lords, the standards for our anti-money laundering regulations
come from the FATF, which defines an international approach. My
noble friend is right that we have the opportunity, having left
the EU, to adapt the anti-money laundering regulations to make
them more proportionate and more effective. We have already done
that in a number of areas, and the piece of work we are going to
do, looking at the evidence around the risk of domestic PEPs, is
a further area in which we can do some work.
(CB)
My Lords, I declare an interest as chairman of Hoare’s bank. To
pick up on the point made by the noble Lord, Lord Forsyth, it is
now several years since we left the European Union. The Treasury
has regulatory powers to change the relevant legislation, and the
Government are determined to prove the benefits of Brexit. Surely
it is time to use those powers to make progress on this
issue.
(Con)
I agree with the noble Lord that we should make use of the new
powers we have. As I said to the House previously, we have
already made a series of amendments to the money laundering
regulations to reduce unnecessary burdens—for example, scrapping
the requirement for the creation of a bank account portal, which
was seen as disproportionate. There is more work to do in this
area, and that work is under way. We published the review of our
anti-money laundering regulations in June, and we are committed
to consulting on broader changes to our approach. The main focus
of that is on the supervisory bodies for anti-money laundering
regulations, but this issue is also being looked at as part of
that work.
