My Lords, the purpose of Report is to report back on things that were inadequately dealt with in Committee. Amendment 69, which I am
speaking to, was inadequately dealt with in Committee. We had a debate and a very unsatisfactory answer, so I want to return to it—not at the same length as in Committee, but nevertheless in some detail that might make for uncomfortable listening for different parties in the House.
The idea is for risk assessment and due diligence policies to be used to control and look at procedures on political donations. What is the problem? Dirty money in the UK leaves parties exposed to malign influence, risks fostering dependence on the proceeds of crime and other dubious funds, and undermines the integrity of the electoral system. PPERA does not require UK political parties to run anti-money laundering checks on donors. In fact, there are no indications that parties do robust checks on the source of donations, nor that parties reject donations after such checks have been made. As the UK’s anti-money laundering framework has been progressively tightened over the last decade—I pay tribute to the current Government on this issue, as I have done before—political parties’ minimal checks have become an increasingly glaring anomaly. Examples from the media suggest that if parties check the source of donations at all, they are inadequate and fail to prevent the flow of tainted money into UK politics.
The Electoral Commission has argued since 2018 that risk management principles from anti-money laundering checks by businesses could apply to election finance. In July 2021, the Committee on Standards in Public Life recommended that parties have anti-money laundering style procedures to determine the true source of donations.
How would Amendment 69 address the problem? It would update PPERA to require parties to develop and publish reasonable and proportionate risk-based policies for identifying the true source of donations above £7,500—we are not looking at small donations here. Parties would need to have reasonable and proportionate risk assessment and due diligence controls and procedures in respect of those policies, as provided for in a statutory instrument. For any donation or an aggregate amount exceeding £7,500, parties would need to undertake enhanced due diligence checks, with a simplified process thereafter. Donors giving over £7,500 would need to declare whether their business is in a high-risk sector, which is defined in the amendment, and whether they have been under formal investigation or convicted of certain offences. Parties would need to include a statement of risk management in their annual accounts identifying that.
What have the parties done about due diligence checks on donations? The Committee on Standards in Public Life’s report, Regulating Election Finance, identified broad support for exploring anti-money laundering style regulations from the Liberal Democrats, Labour and the Scottish National Party. Both Labour and the Liberal Democrats agreed that there was merit in exploring this style of regulations but that it would be important to think about how the process would work and the administrative workload involved. The Conservative Party told the Committee on Standards in Public Life that it thought that current regulations for donations were sufficient.
In their response to the Committee on Standards in Public Life’s recommendation that parties should have procedures in place for the true source of donations, the Government said that
“it is very important to balance the need for parties and other campaigners to generate funds against the cost of actually carrying out checks on donations, to ensure they come from permissible sources. We think the current rules are proportionate and achieve this balance.”
When a version of Amendment 69 was debated in Committee—it was rather longer; it is still long but it has been tightened up a bit—the noble Earl, Lord Howe, said that
“all we can do is keep the rules under review. I am suggesting that in this particular area, the balance is about right.”—[Official Report, 28/3/22; col. 1378.]
Let us look at the balance: due diligence checks would be a relatively low administrative workload. If due diligence checks had been required on donations above £7,500 in 2021, the Liberal Democrats would have conducted checks on just 11% of donors, or 72 donations out of 642; Labour on 25%, or 133 out of 536; the Greens on 29.2%, or 19 out of 65; and the SNP on 63%, or seven out of 11. This means that, at most, Labour would have had to do checks on one donation every 2.7 days over the course of a year, and the Liberal Democrats would have had to do one check every five days. Obviously, because some donations come from the same donor, it would probably be less frequent than that.
Now we come to the Conservatives; no wonder we get complaints from the Tory Benches about what is being said. I apologise to the noble Lord, Lord Cormack, but that was a very unfortunate intervention. The Conservatives would have checked 51.5% of donors— 457 donations out of a total of 887 were of £7,500 or more. Of course, this reflects their greater resources, with donations of almost £19 million in 2021—around double what Labour received.
I have three examples of potentially suspect donations. I gave a lot more in Committee, and I stand by them all; they are all there on the record. All major political parties have accepted potentially suspect donations from individuals and companies that were under investigation or later found to be involved in economic crime. The media has reported on a catalogue of such donations, with Spotlight on Corruption providing most of the information. The Conservatives received £2 million in cash donations from Lycamobile, a company whose premises were raided by French authorities in 2016 on suspicion of money laundering, leading to the arrest of the company’s directors. Despite evidence emerging in 2015 that Lycamobile employees were dropping off rucksacks full of cash at post offices across London, the party took a further £587,000 from the company until July 2017.
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Labour, of course, had its hands dirtied with the Hinduja brothers. A £1 million donation was made in 1998, at the same time as one of them was attempting to obtain a British passport. At the time the gift was accepted, the brothers were under investigation in India for paying commissions into Swiss bank accounts as part of alleged kickbacks in a major arms deal between India and Sweden, in the Bofors gun scandal.
The Liberal Democrats, of course, have a famous example, which goes back a long time—I am not sure whether there is a more recent one. In 2005, they accepted an infamous £2.4 million from the fraudster Michael Brown and declined to pay it back after it emerged that the money had been stolen. Mr Brown later said that he regretted the donation; he thought that the Liberal Democrats should not have accepted it.
Those are just three examples but the point is simple. There ought to be a requirement. The Committee on Standards in Public Life is where I rest my case, in a way; it has been absolutely clear about this. There is a strong case for requiring parties to make these checks. Businesses have to do it, and rightly so. The checks, as I have shown, are not onerous, with a £7,500 limit. I would not argue if the limit were £10,000, but I would not go beyond that. The fact is that it is not onerous on the parties. There is plenty of evidence that requires us to see that these checks take place, so that tainted, dirty money does not come into British politics. The Minister will have to have a much better answer than the noble Earl, Lord Howe, had; otherwise, I might push this.