By Paul Hutcheon, Scottish Political Editor

February 19, 2006

A Scottish Euro MP with strong links to financial services has been criticised after it emerged he had backed proposals that could benefit some companies with which he is involved.

But he has championed them at the same time as having a significant stake in both sectors.

Purvis’s alleged conflict of interest was first apparent during last year’s passage of the Third Money Laundering Directive, which committed member states to combating terrorism by clamping down on illegal transactions.

The legislation requires EU members to make firms report suspicious dealings, as well as tightening the regulations on the financial vehicles used for “dirty money” transactions, such as trusts and hedge funds, which are largely unregulated investment portfolios.

Bankers and others in the financial world were unhappy with the original draft of the directive because they felt it placed extra burdens on business.

These fears were shared by Purvis, a member of the European parliament’s Economic and Monetary Affairs Committee, who last year tabled amendments, the effect of which arguably watered down the document.

His revisions, some of which were accepted, loosened disclosure requirements and tried to place fewer burdens on firms.

A minute of a January 2005 meeting of the European parliamentary financial services group, which acts as forum for the industry, showed Purvis’s unease with the general plans:

“John Purvis MEP said that while it is necessary to combat money-laundering and terrorist financing effectively, he is concerned that the methods introduced recently or being introduced risked creating a very heavy system and practical problems for both commerce and individuals.”

He also asked an oral question on how the fight against terrorism could be achieved without “gravely impeding commercial and personal transactions”.

Other opponents of the directive ensured that one of the original proposals, which would have required anyone owning more than 10% of a trust to be identified in legal records, was amended to 25%.

Purvis’s actions have caused concern because he is the non-executive chairman of Belgrave Capital Management, a financial services firm. Established in 1994, the company then became part of the Banca del Ceresio Group, a Lugano-based Swiss bank and an investor in hedge funds.

But the MEP’s interest in the subject predates his proposed parliamentary amendments to the money-laundering directive. In 2004, the European parliament approved his plans for the introduction of an EU-wide “passport” for hedge funds.

Purvis said at the time that his proposals, which have still to be adopted by member states, were about creating a “light-handed” regulatory regime that would help the sector – “It is vital that we encourage hedge funds into the EU”.

His role in championing the biotechnology sector is also coming under scrutiny after it emerged that he is a partner in a life sciences firm.

Purvis has long supported biotech, as in 2001 when he helped write a report that called for the industry to be given greater help from government.

In 2002, he hit out at the “Luddite obstruction” which he believed would harm Scottish scientists and farmers, while he also said it was “high time” for European biotech industries to be promoted.

This was followed in 2005 by the MEP becoming a partner in Life Science Capital LLP, a biotech firm set up by his son-in-law.

Purvis declared the financial interests in his parliamentary register, although he has not disclosed the amount of money he receives from the companies.

Consumer groups have long campaigned for tighter rules on MEPs’ financial and other outside interests.

A spokesman for Corporate Europe Observatory, a campaign group that monitors the activities of lobbyists in the EU, said the rules on MEP disclosures were slack:

“It’s a massive problem if parliamentarians have private interests and remuneration for issues which they are discussing in their roles as parliamentarians. If he is working for financial companies that the money-laundering directive will affect, clearly that may involve a conflict of interest.”

In addition to having stakes in biotech and financial services, the Scottish Tory has other private interests that may overlap with his duties as an MEP.

Scottish Executive figures show that Brigton farm, which Purvis’s register of interest states is owned by the MEP, received £3487.96 in 2005 in agriculture subsidies. He also declares a partnership in another firm, Purvis and Company, but does not reveal the identities of his clients.

Speaking to the Sunday Herald, the MEP denied a conflict of interest existed between his political and commercial activities.

“It is all declared. I am trying to do my legislative job, which is to try and make a single European market in financial services. If you know something about something, aren’t you entitled to participate in it?”

On his criticisms of the laundering directive, he said: “We all accept money- laundering rules, up to an extent, so long as they don’t disrupt normal business practices.”

David Miller, a professor of sociology at Strathclyde University and co-founder of lobby watchdog Spinwatch.org, said the Purvis case showed that greater regulation of politicians’ outside interests was required.

“This is an example of a conflict of interest which is all too common in Scottish politics. It is clear that there is a need for much greater transparency and a tighter regulation of the activities of political representatives. One way forward is to tighten up codes of conduct, to clamp down on revolving-door appointments and to outlaw private business interests,” he said.