My Lords, I am grateful to the noble Baroness, Lady Penn, for introducing this SI, following last week’s postponement. Let me say from the start that we support these revisions to the money laundering regulations, or MLR. Any proportionate measures that strengthen our hand in the fight against illicit or terrorism financing are a good thing.
It could be argued that some of these measures should have been introduced earlier. In recent months we have discussed the Government’s mixed record in relation to tackling money laundering and fighting financial crime. However, rather than trying to score political points today, I instead wish to ask the Minister a series of questions about the Treasury’s approach.
First, can the Minister tell us about the process underlying the accompanying impact assessment? She very kindly wrote on 14 July to inform me that the assessment had been rated red, or “not fit for purpose”. Nevertheless, the Treasury wanted to push ahead with the debate as planned. Despite that correspondence saying that the IA had been published online, I was unable to find it on the legislation.gov.uk website last Wednesday afternoon. This debate was therefore delayed. This may be a fairly minor concern in the grand scheme of things, but legislative processes are important.
Although we have concerns about the IA achieving a red rating, we will nevertheless support the regulations’ passage. As I said earlier, many of these changes are sensible and technical updates. The technical nature of the money laundering regulations, however, gives rise to another question. The success—or otherwise—of MLRs relies on formal guidance for individual sectors. These documents need to be updated and get final approval from the Treasury before dissemination. When is that process expected to begin and how long is it likely to take?
Turning to other issues, could the Minister go into a little more detail on the Government’s approach to crypto assets. It seems sensible to extend the so-called travel rule, as well as the power of the Financial Conduct Authority in relation to annex 1 companies dealing with crypto assets. Since the Russian invasion of Ukraine, we have seen the exploitation and movement of crypto assets as a means of circumventing international sanctions. We are also seeing more and more criminal funds funnelled into different forms of digital assets, as there is a perception that using such avenues carries significantly less risk of intervention by law enforcers and regulators. If the new measures help to tackle these realities, that is welcome, but does the Minister agree that the need for wider regulation in this area is becoming ever more urgent?
The previous Chancellor was a big supporter of crypto. He stated his ambition for the UK to become a “global hub”—indeed, this will be the subject of a Question on Thursday. Can the Minister confirm that
the new Chancellor shares Mr Sunak’s enthusiasm, or are we likely to see a change in both ambition and regulatory direction?
We are, of course, in the midst of a wider review of the UK’s anti-money laundering regime. According to the Explanatory Memorandum, that review is
“intended to shape the UK’s broader direction on AML for the coming years”.
If I am not mistaken, completion of that review was expected in June. Can the Minister confirm that it was completed as planned and, if so, might she be able to commit to a timescale for the publication of its outcomes?
Given the UK’s participation in the Financial Action Task Force, just how much flexibility do the UK Government have? We are free to deviate from the FATF in instances where there is minimal risk, but will the Government want to threaten getting a cleaner bill of health as part of the body’s 2025 UK review?
4.15 pm
This SI makes minor changes to the Economic Crime (Transparency and Enforcement) Act to ensure that discrepancies in company records are reported in a timely manner. Can the Minister provide an update on the implementation of the register of overseas entities? Enabling SIs are gradually being laid and debated, but do we have a firm date for enactment?
In addition, do we have an update on what has become known as the economic crime Bill part 2? The noble Lord, Lord Callanan, stated on multiple occasions that the Government aimed to deliver that Bill early in the new Session. I am not aware of its impending publication, but I hope the Minister can set me straight on that. Central to that Bill will be Companies House reform. These regulations do not go that far, but they give that agency and its parent department greater access to information about suspected money laundering. Can the Minister set out exactly what rights Companies House has at present? If these have long been deemed insufficient, why are changes being made only at this point?
I appreciate that I have bombarded the Minister with a variety of questions, so perhaps she could use the early portion of her Summer Recess to write.