Economic Crime (Transparency and Enforcement) Bill
Monday 7th March 2022
(2 years, 8 months ago)
Commons ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 7 March 2022 - (7 Mar 2022)
The Secretary of State for the Home Department (Priti Patel)
I beg to move, That the Bill be now read a Second time.
The United Kingdom is united in opposition to Putin’s horrific, unjust war on Ukraine. The depth of that feeling was seen in how the entire House rose to applaud the Ukrainian ambassador at Prime Minister’s questions last Wednesday. Mr Speaker, that you allowed that rare intervention in our parliamentary proceedings speaks for the unity of the House. Putin must fail, and the Government are taking a wide range of actions to that end along with an extensive package of support for the heroic Ukrainian people. Putin is a gangster.
Joanna Cherry (Edinburgh South West) (SNP)
As the Home Secretary is straying to points outwith the Bill, I want to address how the airwaves at the weekend were full of criticism—both internal and external to the United Kingdom—of her scheme to help Ukrainian refugees. When will she announce something to speed up the scheme and give it the degree of urgency that their dreadful plight necessitates?
Priti Patel
I am grateful to the hon. and learned Lady for her question, because it gives me the chance to clarify what is happening in a fast-moving picture. As my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities said, I was in Poland on Friday. This is a rapidly moving picture, and it is important for all colleagues in the House to know that the first quality-assured figures on the Ukraine family scheme will be published this evening. I want to make it abundantly clear that the figures that are now public are absolutely inaccurate and have not been assured by the Home Office.
The hon. and learned Lady also asked about our scheme. Before I return to my remarks, it is absolutely right to say that our scheme is the first of its kind in the world, and we cannot measure it against that of any other country. We have already had 14,000 people apply, and we also have a sponsorship scheme that will be announced later on. Of course, the extended family route was announced on Friday.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
Will the Home Secretary clarify whether the Home Office has set up a visa application centre in Calais, or are people still being sent on journeys of hundreds of miles back to Paris or Brussels for the checks that they need to get safely into this country?
Priti Patel
Again, for clarification, as I set out in the House last week, we are surging capacity across our VACs to ensure that as many people as possible are getting access. Let me—[Interruption.] If the right hon. Member would like to listen to my response rather than shout from her seat, it is absolutely right that we have already had people in Calais. Let me therefore again clarify—I said this over the weekend—that we have staff in Calais and support on the ground. It is wrong to say that we are just turning people back; we are absolutely not. We are supporting those who have been coming to Calais. It is also important that we do not create choke points in Calais but encourage a smooth flow of people. In particular, I confirm that we have set up a bespoke VAC en route to Calais but away from the port because we have to prevent that surge from taking place.
Mr Speaker, this does not relate to the Bill, but there is another issue about our checks that the House should know about. Not only are people-smuggling gangs roaming around Calais but, over the weekend and today before coming to the House, I have been on calls about the human trafficking cases that are manifesting at the border. It is therefore right that we have the right process in place to check people and to safeguard them.
Jim Shannon (Strangford) (DUP)
I thank the Secretary of State for what she is doing and the staff put in place to try to help move things on. However, only 50 people have been processed so far, and my constituent, whom I spoke about in the Chamber last week, is in Ukraine today to collect her son and daughter but uncertain about how to bring them home. I seek the Secretary of State’s clarification on how we can make the process better for people with families here who are going through Poland or Romania to come here.
Priti Patel
The hon. Member makes an important point. Having been to Poland myself and seen the processes—I am also due to speak to my Romanian counterpart later today—I know that they have issues about capacity. We have had requests for technical capacity and support not just through our VACs but to help the host countries to do a lot more work at the borders. We are doing everything that we can.
The hon. Member also mentioned his constituent. If they are in Poland, we have got a huge amount of capacity and plenty of spaces for people to be processed, but they do need to come to our centres. If he would give me their details, I will ensure that we are joining that up in country.
John Redwood (Wokingham) (Con)
The Home Secretary has a lot of support on the Government Benches for the compassionate and sensible way in which she is going about this. Will she confirm that she is listening both to what the refugees want, which is often not a long-term settlement a long way from Ukraine, and with regard to the security issues that this all poses?
Priti Patel
My right hon. Friend is absolutely right. I must emphasise that every single crisis requires a bespoke and unique response. There are two very big calls coming from the region and from our counterparts. First and foremost, they are asking for help on security measures right now; that consistent theme is coming over. That comes down to checks—they are undertaking checks—but they are also very concerned about wider security issues, some of which I simply cannot discuss in this House, for clear reasons. The second point—even the Ukrainian ambassador made this point to me yesterday and I hear it every single day from my counterparts—is that there is a call to keep people in region. There is a big demand for that, and that is where the wider aid effort has to focus, in addition to the work that we are doing on humanitarianism.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I do not wish to disturb the flow of the Secretary of State’s speech for very long, but I want to make one point. We all know that some of the brightest minds in the City of London are, at this moment, burning the midnight oil and finding ways to dodge anything that this Government, with the support of the Opposition, are bringing in. Is it not a fact that we need rapid action—as rapid as any of the other countries that are taking out sanctions—and will she promise me that it will be fast, furious and efficient?
Sir Robert Goodwill (Scarborough and Whitby) (Con)
I was contacted on Saturday by a former constituent who had escaped from Ukraine with his Ukrainian wife. He contacted me again last night to say that I did not need to help him—he had been to our embassy in Berlin and expected that everything would be sorted out today, and that he would come to the UK this week—so I reassure her that, actually, the system is working and people are getting the help they need.
Priti Patel
I thank my right hon. Friend for the example that he shared with the House. That is really important, because we have surge staff across every EU visa application centre. I came to the House last week and said that we absolutely would do that and we are indeed doing it.
Sir Roger Gale (North Thanet) (Con)
I have been told that people arriving at Calais are being told that they have to go to Paris or Brussels to get visas. Is that correct or not? If it is not, will my right hon. Friend please tell me why it is being said? In 1972, we took into Kent thousands of Ugandan Asians. We did it almost overnight and without any difficulty at all. Last Monday, my right hon. Friend told me that she would cut away the red tape. Why are we not doing that?
Priti Patel
I have already made it clear, in terms of the visa application centre that has now been set up en route to Calais, that we have staff in Calais, and, importantly, people have been coming to the UK from Calais. I am afraid that there has been a lot of misinformation about all this, and I have clarified our position today.
Priti Patel
I will not; I need to make progress and I have been generous with interventions. In addition, on the point that my right hon. Friend the Member for North Thanet (Sir Roger Gale) made, I did say that we would cut away process, but he has already heard me say that there are security concerns and considerations—[Interruption.]
Mr Speaker
Order. There are just too many conversations going on. I am struggling to hear.
Priti Patel
Thank you very much, Mr Speaker.
Putin is a gangster and his regime is underpinned by a mob of oligarchs and kleptocrats who have abused the financial system and the rule of law for too long. Putin’s cronies have hidden dirty money in the UK and across the west, and we do not want it here. Expediting this legislation, which I know the whole House supports, will mean that we can crack down on the people who abuse the UK’s open society.
Bob Seely (Isle of Wight) (Con)
I am delighted that my right hon. Friend is bringing up not only the oligarchs, but the enablers and facilitators. What do the Government think about various potential bad actors in the House of Lords and what should we be doing about them?
Priti Patel
My hon. Friend and I spent some time on the Select Committee on Foreign Affairs, which looked at that very issue. He is right to highlight enablers and, with them, many other associates. It is right that through the Bill and the changes we are bringing in, we find a way to capture as many of them as possible. That is what the Bill seeks to do.
Aaron Bell (Newcastle-under-Lyme) (Con)
Further to the point made by my hon. Friend the Member for Isle of Wight (Bob Seely), would the Government be willing to adapt the language of the Titles Deprivation Act 1917, which was used to withdraw peerages from peers who gave succour to Germany in the first world war, after proper investigation by the Privy Council?
Priti Patel
We will look at the issue, as we have said consistently. Part 1 of the Bill, which I will expand on shortly, is only one of the measures that we are taking, but we have to rule nothing out.
Andy McDonald (Middlesbrough) (Lab)
Across the House, we all want to see these bandits nailed. Is the Home Secretary content that the Bill will actually stop the disposal of properties? In my view, the register may not succeed in inhibiting that. We want to stop people getting away with it and disposing of assets. Will the Bill do that?
Priti Patel
The hon. Gentleman is absolutely right to raise that point and to highlight the legal basis on which we can confiscate assets, property and so on. Unexplained wealth orders are one of several tools we can use that are covered in the Bill.
Mr Jonathan Djanogly (Huntingdon) (Con)
A lot of houses are owned by criminal gangs for money laundering purposes, often in rural areas, and left empty. If people do not register, will the Bill allow us not only to impose a fine on them, but sell those properties so that they can go back to the community rather than be left there to rot?
Priti Patel
My hon. Friend is absolutely right. I said that unexplained wealth orders were one of several tools, but we have other tools that have to be deployed. Registration, beneficial ownership—all those aspects are covered in the legislation, and rightly so. By accelerating the legislation, we are concentrating on the sharpest tools we can use and the powers we can bring into force in the most focused time. Expediting this legislation will send a very strong signal that the UK will not be a home for corruption.
Mr David Davis (Haltemprice and Howden) (Con)
Will my right hon. Friend give way?
Priti Patel
I will give way shortly, but first I will make some progress, if I may.
This will be about hurting Putin and his vicious regime, which has robbed the Russian people of their chance for democracy, peace and prosperity—not only that, but even their own wealth has been used and abused by these kleptocrats and oligarchs. The reforms in the Bill will give us greater power and more information to identify and investigate the illicit wealth of Russian criminals, their allies and their proxies. The new property register will have an immediate effect, dissuading those intending to buy UK property with illicit funds. Oligarchs could be slapped with an unexplained wealth order—one of the tools that we will have at our disposal—and the Treasury will be better able to act when financial sanctions are breached. We are implementing the most severe package of sanctions ever imposed on Russia or on any major economy.
Mr Kevan Jones (North Durham) (Lab)
The right hon. Lady spoke about unexplained wealth orders. Does she have a commitment from the Treasury to ensure that the National Crime Agency and other agencies that deal with those orders are well financed?
Priti Patel
The right hon. Gentleman makes a very important point; I am pretty certain that he has raised several times in this House the need for legal protections, finance and an approach that gives law enforcement the tools it needs. The Bill is doing that, and we are acting not only through legislation, but through the wider way we help agencies and law enforcement to function, operate and go after those who have been undermining our system.
Mr John Baron (Basildon and Billericay) (Con)
Following on from that point, the Bill is very welcome, but many of us believe it could go further, which is why we have supported and tabled various amendments. Legislation and regulations are worth their salt only if they are properly enforced. The National Crime Agency, for example, has had cuts to its funding in recent years. Will the Bill put that right not just for the NCA, but for all enforcement agencies?
Priti Patel
That is a really important point. This is about how we operationalise the Bill—how we use the tools that we are giving our agencies. Yes, resourcing is required. We have already stepped up with a new kleptocracy unit in the NCA and have put more resources into it. We are absolutely not going to stop—we cannot stop. We are catching up in many quarters, we really are, and we want to use the full force of legislation and the full force of the law to go after many of these individuals.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
I thank my right hon. Friend for and congratulate her on driving this Bill forward so quickly, co-operating with all sides to get it on to the statute book. I wish to raise one point. I noticed that in the original draft, although there has been a slew of amendments since, there were all sorts of little caveats. For example, it let people off the hook if they did not “knowingly or recklessly” give the wrong information. I hope she will agree with an amendment I have put my name to and we will strike that out. There is no excuse on “knowingly or recklessly”; someone either did or did not co-operate, and if they did not, they should get the full force of the law.
Priti Patel
My right hon. Friend is absolutely right, and he has also pointed out the vast drafting that has taken place over the weekend, with various amendments. I am grateful to all colleagues, on both sides of the House, for their co-operation on many of those amendments. He is absolutely right to say that people have an intent, which is what we are going after.
Mr David Davis
The Russia sanctions regime is across eight different sets of regulations, and even the Commons Library could not disentangle them for me. In some cases, simply stopping people using their assets does not go far enough. For those found to be working on behalf of Putin and his elite, we should be expropriating their assets. Does this Bill simply allow freezing or does it actually allow us to confiscate assets?
Priti Patel
My right hon. Friend has hit the nail on the head, and I am going to come to some of that in my remarks shortly. If he will just bear with me, I would like to make some progress. I am conscious of the protected time we have today, so I ask all colleagues to bear with me.
This legislation is concise and tight for very good reasons, hence the number of amendments that have been made; we want to move at pace. But we cannot stop there, and for the benefit of this House—I know colleagues are aware of this—let me say that there will be a second economic crime Bill, a follow-on Bill in the next parliamentary Session, with further measures. We simply cannot get all the measures in right now. We have focused on the ones that will have the greatest impact and enablement.
Matt Hancock (West Suffolk) (Con)
In respect of the Sanctions and Anti-Money Laundering Act 2018, many of the problems that we face today are due to amendments made in the other place, and it has subsequently come to light that many of those amendments came from those who are acting for oligarchs and then legislating for loopholes. Will my right hon. Friend confirm that the other place should listen very carefully to the elected House on this matter and make sure that this Bill, with these amendments, gets sent back here forthwith, without more loopholes being put in place by the other place, as they were years ago?
Priti Patel
I wholeheartedly agree with my right hon. Friend on that. We could do a rerun of exactly what happened back in 2018, but, in the interests of time, we want to crack on with where we are going with this Bill. It will enable the greatest changes to the companies register since it was established nearly 200 years ago. Companies House will be reformed and we will verify the identity of every company director and beneficial owner. I know that Members of this House have been calling for that for a considerable time. No criminal or kleptocrat will be able to hide behind a UK shell company ever again—those infamous brass plates will go. This will be a boost to all legitimate businesses in the UK and, importantly, it will make it easier for them to get the information they need.
The next Bill will bring forward reforms to prevent the abuse of limited partnerships; new powers to seize crypto-assets from criminals—that is a new and emerging area where we have so much more to do; and measures to give businesses more confidence to share information on suspected money laundering. It will be a very substantial piece of legislation. I assure the House that we are already drafting that legislation and it will be brought forward as soon as we are able to do so and we can get the time in the House. Today’s Bill and our commitment to a second Bill will show that in this Government, we are all acting collectively and unitedly to root out the dirty money in our economy and, importantly, to hobble Putin and his cronies.
Dame Margaret Hodge (Barking) (Lab)
I welcome the indications that the Home Secretary has given of what will be in the Bill that will arrive, I hope, early in the next Session, but will she also consider the role of the enablers—lawyers, accountants, banks and others—who either condone or themselves facilitate much of the money laundering and financial crime?
Priti Patel
I agree with the right hon. Lady, and I am also grateful to other Members who have not just highlighted this issue but given specific examples. A great deal of work is being done. It is important that we take a collective approach institutionally, and that our legal basis is sound and solid.
Catherine West (Hornsey and Wood Green) (Lab)
The Home Secretary is very generous in allowing so many interventions.
During the 2017 Parliament, the then Prime Minister appointed a tsar—for want of a better word—to fight corruption within the House, but over the years that role has become less effective. Does the Home Secretary think it should be re-established and refreshed, so that someone could really call out many of the issues that we know to be a problem in both the House of Commons and the House of Lords?
Priti Patel
I thank the hon. Lady for highlighting the role of our anti-corruption tsar, my hon. Friend the Member for Weston-super-Mare (John Penrose), who has been supporting the Government at every level. He has also supported me by helping with much of our work on illicit finance and economic crime. He comes to our roundtables, and spends a great deal of time dealing with matters concerning the City and transparency. I can therefore assure the House that we have that function up and running. We have a superb colleague supporting the Government on all those measures, and I am very grateful to him for his work.
Let me now explain the measures in the Bill in more detail. It sets a new global standard for transparency, which is thanks to the work of my hon. Friend the Member for Weston-super-Mare, but it also takes the whole-of-Government approach that many Select Committee reports have called for—I think it fair to say that I have read a few of those reports produced by colleagues and friends—in that it contains several measures from several Departments. It creates a register of overseas entities to crack down on foreign criminals who use the UK property market to launder money. A foreign company that wishes to own land in the UK will be required to identify its beneficial owners and to register them with Companies House. Once a company is registered, an overseas entity identity number will be provided, and that entity will be required to update its information annually.
Kevin Hollinrake (Thirsk and Malton) (Con)
I welcome the measures that my right hon. Friend is introducing, but many Members fear that people who have already bought their properties through a discreet structure will sell them before the measures take effect. Will she look carefully at amendment 64, which Mr Speaker has graciously accepted—a manuscript amendment—and which would effectively prevent people from doing that by means of a prohibition through the Land Registry?
Priti Patel
I thank my hon. Friend for amendment 64. He was in touch with me about it over the weekend. He is absolutely right, and we are looking at the details of that proposal.
Layla Moran (Oxford West and Abingdon) (LD)
As the right hon. Lady knows, the Bill provides exemptions that Secretaries of State would be able to use in order not to require an entity to be on the register. One of them relates to
“the economic wellbeing of the United Kingdom”.
Many of us, across parties—and I thank Ministers for being so constructive in this regard—fear that that could drive a coach and horses through the entire legislation. Is this another amendment that the right hon. Lady is looking at, or would she care to simply accept it?
Priti Patel
At this stage, I am outlining the measures in the Bill. We have a Committee stage coming up, and we are considering all the details, because we absolutely must get this right and ensure that all the measures will be effective.
Overseas entities will be required to verify information regarding beneficial owners and managing officers before making an application for registering, or updating or amending information held on the register. That is very important, because the current system is out of date. We need to be able to keep the information fresh and agile, and ensure that the right checks and balances are constantly applied. They will have to provide evidence to underpin that verification, and Companies House will be able to query all information under the broader powers we will create in the second Bill. If a foreign company does not comply with the new obligations, or if it submits false filings, its managing officers can face criminal sanctions or civil sanctions. Criminal penalties in England and Wales could, depending on the offence committed, be a prison sentence of up to five years, or a fine. We are also introducing a mechanism by which financial penalties can be enforced without the need for criminal prosecution. More importantly, overseas companies will be restricted in their ability to sell or lease their land if they do not comply with the requirements.
Chris Bryant (Rhondda) (Lab)
I am grateful to the Home Secretary for giving way. This is naughty of me, as I have been in the Foreign Affairs Committee and I have not heard all that she has said. Would she acknowledge that clause 31 seems to set a very high bar by saying that it is an offence to give false information only if someone does so “knowingly or recklessly”? I apologise again for arriving late.
Priti Patel
The hon. Gentleman has clearly been occupied elsewhere, and we did cover this point earlier on.
Dame Andrea Leadsom (South Northamptonshire) (Con)
I have been in the Chamber since my right hon. Friend started speaking. She might be aware that over many years one of the problems with Companies House has been the capability of a small business to register a name, take our money by selling us something, not deliver the goods, then go into liquidation and set up again the next day with almost the same name, perhaps with “and sons” at the end of it. Can she reassure me that this Bill will deal with that issue, in the changes to Companies House?
Priti Patel
My right hon. Friend has made an incredibly important point and used a good example to show how the system is being used and abused. I want to reiterate to the House that this is a two-stage Bill. The first stage will deal with many aspects of this, but the full Companies House reform will come in the second economic crime Bill, where that detail will all be worked through. It is important to say this is the first step to making a clean sweep in terms of how we update, in terms of accountability, and in terms of holding individuals and their enablers—their managers and all the others responsible—to account. The House has just heard me speak about the penalties.
Andy Slaughter (Hammersmith) (Lab)
There seems to be bit of a gap between the Home Secretary’s rhetoric and the reality. Last week, the Government were briefing the press that they were drawing up plans to seize British property and use it to house Ukrainians fleeing their homeland. Well, if there are only 50 Ukrainians, that is probably only one property. However, where is the freezing and seizing of assets here? All that this Bill is proposing is a relatively generous time limit on the publication of information. When are we going to get the steps that actually bite?
Priti Patel
I have been speaking for a while and I would have hoped that the hon. Gentleman was listening to my remarks about the many tools that this Bill will bring in to enable asset confiscation, freezing and so on.
That brings me neatly on to unexplained wealth orders. The Bill removes key barriers to the use of unexplained wealth orders. Let me make it clear to people who think they can obstruct law enforcement investigations that that will end now through this Bill. I have already touched on the work of the National Crime Agency. Yes, we will be resourcing it and yes, there is more to do; we are very open and honest about that, and we have to be. We will reform the costs rule so that agencies acting to protect the public will be protected from substantial legal costs when they have acted reasonably in their investigation. The maximum period that a property can be frozen while unexplained wealth orders are in place will be extended, allowing the full force of the law and proper investigation.
Unexplained wealth orders will also be more effective against those who hold property in the UK through trusts. That is another complex entity that tends to lead to complex ownership schemes. Individuals will no longer be able to hide behind opaque shell companies, trusts and foundations. We will do everything in our power to counter the unwillingness of kleptocrats to provide reliable information. These reforms will have an immediate dissuasive effect.
Tim Loughton (East Worthing and Shoreham) (Con)
I support the measures in this Bill, but it all hinges on enforcement. Can my right hon. Friend explain why unexplained wealth orders have been used so little? What research has she done with other countries? The Criminal Assets Bureau in Ireland, in particular, has a much higher success rate in pursuing unexplained wealth orders, tracking down these people and prosecuting them.
Priti Patel
We cannot compare London with certain other countries and economies, and there are well-known barriers to the application and utilisation of unexplained wealth orders. Much of the wealth is legal, and individuals tie our law enforcement system in knots, exposing it to huge costs, including legal costs. The purpose of this reform is to change the entire way in which UWOs are operationalised, and to give law enforcement agencies the legal basis, legal powers and protections they need to go after many of these individuals, as the current system has stopped them doing so.
Sir Oliver Heald (North East Hertfordshire) (Con)
I understand that the Secretary of State for Business, Energy and Industrial Strategy has put forward the idea of having an enforcement unit at Companies House. Will that be available for individuals who want to make allegations of false information on the register, or is there some other mechanism by which we will be able to investigate and press the case?
Priti Patel
With this Bill, we are speaking very clearly about known individuals, known oligarchs. This legislation enables the Government, the NCA and other agencies and aspects of Government to focus on those individuals, which is our priority. The second economic crime Bill is currently being drafted. It links to Companies House reform, which will take slightly longer, and will cover many of those wider issues about reporting and how to join up Companies House and law enforcement.
Several hon. Members rose—
Priti Patel
I will make progress. I have taken plenty of interventions, and I am conscious of the protected time for subsequent stages.
This Bill also toughens up the enforcement of financial sanctions, making it easier for the Treasury to impose significant fines. Even where it has not imposed a fine, the Treasury will have the power to publicly name those who have breached financial sanctions. That will both sanction them and deter others, and we are expanding the information-sharing powers to help the Government shine a much brighter light on malign actors who abuse the financial system. Of course, all this will be a major boon to the Treasury’s ability to clamp down on financial sanctions breaches, and that work will be done with the financial institutions, our economic crime tsar and across the Government. We have to work with the financial sector, too.
We are, of course, working closely with the devolved Administrations on this legislation. The Bill contains provisions relating to the register of overseas entities and unexplained wealth orders, which engage devolved powers in both Scotland and Northern Ireland. We are moving together as one country, and I am confident that we can rely on their support as we continue to expedite legislative consent. I emphasise that we are doing this together in lockstep, and I am grateful to all colleagues across the DAs for their support.
The Government have consulted and engaged widely on the measures in this Bill. The new property register has been designed carefully, drawing on extensive discussions, to balance the need to clamp down on misuse while protecting the ease of doing business. The unexplained wealth order reforms have been designed in close consultation with law enforcement agencies such as the NCA, the Crown Prosecution Service, Her Majesty’s Revenue and Customs and, of course, the Serious Fraud Office. We have also engaged widely with representatives of the accountancy, financial and legal sectors, and with others. Colleagues have raised the issue of enablers many times, and enablers are at the forefront of much of our work.
The Treasury will engage and consult on updated civil monetary penalty guidance for financial sanctions before the reform comes into effect. We are acting decisively, but we are getting the balance right. I urge both sides of the House to support this Bill and to work with us on some of the technicalities in how we kick dirty money out of our country and make it harder for Putin and his associates by bringing this into legislation so that we can operationalise it as soon as possible.
Priti Patel
Not just yet.
As I have said, further measures are coming shortly in other legislation and some of them will take more time to be developed.
Craig Mackinlay (South Thanet) (Con)
On the vexed issue of trusts, whether they be domestic or, more likely, foreign, if they are of a discretionary nature, there is no absolute beneficiary, by their very definition. They may be tucked away in a trust deed in some foreign jurisdiction of which we do not have details. I have looked through the legislation and can see no way in which we can penetrate some of those trusts. I do not even know whether we should, because of the nature of discretionary trusts, for which there will be a list of potential beneficiaries but no absolute beneficiary. The legislation will catch absolute beneficiaries, but I cannot see how discretionary trusts can be caught or, frankly, ever could be.
Priti Patel
My hon. Friend makes an important and significant point. That is exactly the work in which the transparency tsar has been heavily involved, giving the Government advice on that work across Government Departments. All this has to be looked at. I come back to the point that, in recognition that this is expedited legislation, we have not only to consider carefully but to work through the practicalities and how we operationalise the legislation.
The Government are also amending the Sanctions and Anti-Money Laundering Act 2018, which has been referred to many times. We are streamlining the existing legislation so that we can move more swiftly and effectively to sanctions oligarchs and businessmen associated with the Russian Government. The amendments we have tabled will remove the statutory test of appropriateness in the designation of individuals and entities, thereby speeding up designations. It is important that we do that in real time and in fast time, because of some of the related complications.
Matt Western (Warwick and Leamington) (Lab)
Will the Secretary of State give way?
Priti Patel
I am not going to give way, because there is protected time and the hon. Gentleman will get to speak later.
We will remove some of the constraints on designations by description, so that the Government can designate groups of individuals more quickly. That means there will be more agility and flexibility so that we can act. It will help to quickly list members of defined political bodies—such as the Russian Duma, which has been highlighted, and the Russian Federation Council—by body rather than by individual names, all of which can run into the hundreds. We will have the power to apply the legislation to groups. That will ensure that the Foreign Secretary can mirror the listings that have already been adopted by our allies, but via urgent designation procedures. The United States, Canada, Australia and the EU are listed on the face of the Bill for that purpose. Others may be added, by a power, as needed. That will facilitate the closest possible international co-ordination on sanctions. I emphasise the co-ordinated approach we are seeking to take at a time of crisis and conflict. It will help us to strip back unnecessary requirements regarding the making and amending of regulations under the 2018 Act, to streamline the process of establishing or augmenting the sanctions regime.
Of course, we want to protect the public purse by only permitting the payment of damages in connection with designations in the case of bad faith, removing the possibility of damages for negligence. The Bill also provides a power to impose a cap on damages for actions under the 2018 Act. The provisions will apply to any proceedings issued after 4 March, when the amendments were tabled, even if the proceedings relate to designations made previously. That will limit the ability of many of the deep-pocketed oligarchs—we have had this with UWOs—to claim massive pay-outs from sanction challenges. This is a fundamental change to our laws and how we operationalise them. A streamlined review of the reporting requirements under the 2018 Act will follow.
Through this specific legislation, we can focus on Putin and his cronies. We do not choose between a transparent economy and a strong economy: it is transparency that makes our economy, our country and our approach to these issues stronger. The Government are providing our law enforcement agencies with the crucial powers and resources that they need. We want to go after the dirty money and crack down harder on those who violate our financial sanctions and our country. Putin and his band of thugs must not be able to hide their wealth in the UK. This is as much for the sake of ordinary Russians robbed of their wealth as it is for the sake of our country and the west more broadly. We are calling on all countries, all our friends and allies, to take a similarly robust approach. It is by working in co-ordination that we can make a difference. There is overwhelming global condemnation of that regime and the grotesque war that is raging in Ukraine. This Bill is part of our effort, and I commend it to the House.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I welcome the Bill before us today, at a time when rocket attacks are continuing, when homes, community centres and even kindergartens are being hit, and when families fleeing through the streets of Ukraine are being targeted for attack. The Russian President has launched an illegal war against a democratic state. It is a crime against a brave nation. As we stand united with Ukraine, we know that this is a battle for democracy against despotism.
Our country has to play its part. All of us want to see the strongest economic measures against Russia and against the oligarchs linked to the Russian regime who have made their wealth through corrupt and illicit practices, and against those who made their money not through their own sweat and toil, but through corruption and the concentration of power.
A few years ago, the Intelligence and Security Committee’s Russia report said that the UK has
“offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’”.
That is damning. It issued this warning nearly three years ago:
“It is not just the oligarchs…the arrival of Russian money has resulted in a growth industry of ‘enablers’”—
individuals and organisations that manage and lobby for the Russian elite. Chatham House has referred to Britain’s “kleptocracy problem”.
The fact that corrupt elites from all over the world can launder their money and their reputations through our capital city is shameful. The fact that an industry of enablers has grown up here to facilitate those corrupt elites, to help them hide their money, evade tax or launder proceeds of crime is deeply damaging to our economy, to our international reputation, to the rule of law and to democracy.
So yes, we welcome the Bill. We welcome the chance of stronger sanctions and measures to make it easier to put pressure now on Russia in the face of this appalling war. We welcome the improvements to unexplained wealth orders, making it easier for the police to use them and harder for those with endless wealth to use their riches to block them, and we welcome the register of overseas entities to get some transparency and to make it harder for corrupt elites to hide their wealth in the UK property market. We will support the Bill today and support the process to get it through Parliament as fast as possible.
Many of these measures should have been introduced some years ago. Some that we need and have long been promised are not yet before us. All of us should accept that some of this action should have taken place earlier, because we had been warned. We had been warned by Transparency International back in 2015; by the evidence from leaked international documents such as the Pandora papers; by the National Crime Agency, which said that unexplained wealth orders were too hard to use; by Members of this House when we confronted the murderous intent and actions by Russian agents on British soil during the Salisbury attack four years ago; and by the damning Russia report. We were promised reforms in many of these areas in 2016. There was a consultation in 2018 and reference to a Bill in the Queen’s speech in 2019. We still do not have the much-needed Companies House reforms before us today.
Catherine West
Does my right hon. Friend agree that, had the Government got a move on with this years ago, we would be able to deal with phoenix companies today, which rip off members of our communities day after day? We could have dealt with that, too, in one blow.
Yvette Cooper
I agree with my hon. Friend that action should have been taken much earlier to address that, which should mean that there is an even greater imperative on us all now to ensure not only that this Bill passes, but that the subsequent economic crime Bill that we badly need is brought forward as swiftly as possible. That is one of the areas where the Opposition have submitted amendments.
Dame Angela Eagle (Wallasey) (Lab)
Is my right hon. Friend as surprised and worried as I am that the Office of Financial Sanctions Implementation, which is in the Treasury, has 37.8 full-time equivalent people working in it?
Yvette Cooper
My hon. Friend makes an important point. Unless we have the ability to use the powers we have and the powers we are discussing in this Bill, in practice nothing will happen. We know that there is considerably more investment in taking some of these measures in the United States, for example. There are also issues with enforcement resources for the National Crime Agency.
Chris Bryant
The enforcement issue is really important. For instance, following the invasion and annexation of Crimea, we made it a criminal offence to support tourism activities in Crimea. However, Quintessentially, which is run by Ben Elliot, has been providing restaurant recommendations in Crimea to Russian oligarchs. Surely he should be investigated and everybody should be distancing themselves from him now.
Yvette Cooper
I must say that the information my hon. Friend provides is deeply disturbing. There is a huge responsibility on us all, and particularly on the Government, to ensure that there is no conflict of interest in the source of any political donations to the party or any role in the party, and that there is a proper distancing from the appalling activities of corrupt Russian elites.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
At the last election but one, a former intern of mine, now a very wealthy Hollywood lawyer, sent me £5,000. I immediately sent it back because it was a foreign donation. Is that not the sort of example that every Member of this House should set for how to behave when foreign people offer us money?
Yvette Cooper
My hon. Friend makes an important point. For example, there is discussion as part of this Bill about shell companies and ensuring that action is taken on economic crime. However, we had similar discussions about shell companies on the Elections Bill, where the measures taken were not strong enough.
Overall, we welcome this Bill, although we want some of the further measures to be introduced swiftly. We welcome the Government’s agreement to some of our amendments, which have pushed them to go further; we will press them still further in Committee on some of those issues, but we want to continue to work with them, and there are many areas of consensus.
That is why the scale of the Government’s failure to support Ukrainian refugees is so troubling, and I must pick up some of the points the Home Secretary made earlier. She said,
“I confirm that we have set up a bespoke VAC en route to Calais but away from the port”.
No. 10 has said,
“I don’t believe there’s one there now but we’ll keep it under review”.
The Home Office website is still telling people to go to Paris. Journalists in Calais, looking for any centre that there might be, are still unable to find anything; all they can find is a few Home Office staff, in a building with a crisp machine but no visas. One family, who have been there for five days, have been told they cannot get an appointment in Paris until 15 March.
I must ask the Home Secretary what on earth is going on. If she cannot tell us where that visa centre is en route to Calais, then there is no hope or chance of Ukrainian families being able to find it on the way to Calais in order to get sanctuary.
Priti Patel
I think the right hon. Lady did not hear what I said earlier. I said that I can confirm that we are setting up another VAC en route to Calais—I made that quite clear in my remarks earlier on. I also said that it would be away from the port in order to prevent the surge that we do not want to take place. It is news to me that she says that there is a family—[Interruption.] Well, as I said earlier on, we do not want to create choke points in Calais, given the people trafficking and smuggling issues that have been materialising. That is a fact. I am sorry that Opposition Members are very dismissive of this, but I am involved in a lot of engagement on it and I am seeing all sorts of concerning matters. I need to pick up on the right hon. Lady’s point about a family that says they cannot get an appointment at a VAC in Paris. That is news to me. I have not been told that that is the case; I have been told very clearly that there are appointments and people are not having problems accessing appointments. I am very happy to call her office directly later on today and give her the facts on that.
Yvette Cooper
That would be very helpful. But we also need to know when this visa application centre will be set up and operational, because right now this means that people are being turned away from Calais because they do not have the biometrics or the security checks they need and so are being sent back to Paris in order to do so. We need to know when that is going to be in place.
Dan Carden (Liverpool, Walton) (Lab)
Are not the Government and the Home Secretary absolutely out of step with the British public on this? When bombs are raining down on families across Ukraine, the public want us to open the doors and welcome them in.
Yvette Cooper
I think the public want to see us doing our bit, and that is not what is happening. What people are seeing time and again is families having to leap over additional hurdles—additional bureaucracy. People are being told to wait 72 hours after their security checks are all cleared just because of bureaucracy. Lots of relatives are still being left out. Elderly aunts or 19-year-old nieces are not included and are being turned away. That is the point. [Interruption.] If the Home Secretary says that is not correct, I really urge her to stand up and clarify it, because at the moment her guidance says that elderly aunts and 19-year-old nieces are not included in the family visa scheme.
Priti Patel
I appreciate that this is now becoming a much wider debate, but on Friday we launched an extended family route that covers the very family members that the right hon. Lady is referring to, and people are applying—over 14,000 have applied. That scheme is up and running. I said in my earlier remarks that later on this evening we will be providing assured data and assured numbers on the people who are coming through that route. It is wrong to say that this Government are not welcoming Ukrainian refugees. We have a very unique scheme. As I said, it is the first of its kind in the world and it cannot be measured against that of any other country.
Mr Speaker
I think I need to come in here, just for a minute. At the end of this debate I expect the Minister’s wind-up to pick up on some of the points that have not been answered—that is the idea of having a Minister speak at the end. Hopefully we can make sure that the Government, having been given time to think about the answers, are prepared to respond to some of the questions that have been raised.
Yvette Cooper
I am grateful, Mr Speaker, because there are some very serious questions.
The Home Secretary has just said that elderly aunts are included, but that is not what the website says. Elderly parents are, yes, but elderly aunts are not. We really need to know what the facts are, because right now a lot of families are being turned away. Lots of relatives who are families of Ukrainians working here on healthcare visas or on study visas are also not allowed to come. They are not included in her scheme and families are desperate now.
What is happening is shameful. There are too few relatives arriving and no sign of the sponsorship scheme that the Government have promised will allow those who are not family members to come. Will the Home Secretary please stop claiming that this is all world-beating and world-leading and that she is doing everything possible, and accept that it is not working and things are going wrong? Otherwise, how can we possibly have confidence that she is going to put this right and make sure that refugees can get the sanctuary they need?
Stella Creasy (Walthamstow) (Lab/Co-op)
As of an hour ago, there was a poster up in Calais that says simply, “No visas delivered in Calais.” It tells people to go to an online form and then to Paris or Brussels. Does my right hon. Friend understand why the Ukrainian community in this country are horrified, frustrated and furious to see their relatives who are in Calais being given such information and such a lack of clarity, and does she agree that we need to tell people where this processing centre is? People seeing that sign will give up hope, when hope is what they need from this country.
Yvette Cooper
My hon. Friend is absolutely right. If we in this House are so confused and cannot follow this chaos, it must be devastating for families who are desperately trying to be reunited. I hope the Home Secretary will deliver on some of the promises she has made, but there is currently a huge gap between the rhetoric and the reality, which is letting Ukrainian families down badly.
Stephen Flynn (Aberdeen South) (SNP)
On the topic of confusion, is the right hon. Lady as concerned as I am about the fact that the Home Secretary seemed to indicate that the figure of 50 visas is inaccurate, yet in response to a question from the hon. Member for Rhondda (Chris Bryant) in the Foreign Affairs Committee earlier today, the Foreign Secretary said that she believed the Home Secretary had announced that? Is it 50, or is it not? Does this confusion not cut to the heart of the issue?
Yvette Cooper
Clearly we need updated figures, but my understanding is that 50 visas is the figure issued by the Home Office yesterday. I hope we will have a further update, but the problem is that we are now 10 days into the conflict, and the Home Office was warned—
Kevin Hollinrake
On a point of order, Mr Speaker. We have been waiting for the economic crime Bill for many years. There is a huge number of amendments on the Order Paper and a huge number of people wanting to speak. This is a very important issue—absolutely critical—but it does not relate to that legislation. Could we have a ruling from you on that point, sir?
Mr Speaker
I make the decisions, and I think it is all right. What I would say, in fairness, is that the Home Secretary spoke for well over 30 minutes—in fact, I think it was nearly 40—and I am therefore giving some leeway. It is a very important matter; it is also protected time, so one need not worry.
Yvette Cooper
Thank you. Mr Speaker. The concern for the House is that the Home Secretary has provided information today that does not yet seem to be accurate, and we urgently need accurate information. We also need a simple route to sanctuary for people who want to join family or friends and need sanctuary in the UK to be able to do so. That is not yet happening. We desperately need the Home Secretary to get a grip.
We need action to support refugees. We need the UK to do our bit. We also need the measures on sanctions, unexplained wealth orders and the register of overseas entities to be put swiftly in place. We need Putin to feel the full force of sanctions now; we welcome the sanctions that are in place, but more than a week into the war, we have sanctioned only a handful of oligarchs and are still falling behind other countries. I hope the Bill will make it possible to speed things up, but there are concerns that people who may be subject to sanctions will still have time to move their wealth. We will discuss those concerns later in Committee, where amendments have been tabled that may be able to address them.
Turning to beneficial ownership, UK property has been used to launder illicit wealth for too long. We welcome measures to reveal for the first time who the ultimate foreign owners of UK property are. We welcome, too, the Government’s recognition that the initial, draft Bill did not go far enough; they have accepted our amendments on stronger fines and proper identity checks, and that is welcome. Giving people 18 months to dispose of all their assets, as the draft Bill suggested, so they can hide them in some other regime was clearly ludicrous; it was a chance for them to get out of London and stash illicit money somewhere else. But even six months gives people a very long time, and is not justified by the scale of the problem we face. People have already had six years of warning that this Bill was coming. That is why in our amendment, we call for 28 days instead.
We support the measures on unexplained wealth orders. The fact that they have been used in only four cases in four years shows that for too long they have not been working: they are too hard for the police to use and too easy for the clever lawyers of rich criminals and oligarchs to block, and the costs to the National Crime Agency if it loses a court case are too great. We have called for more action to monitor progress to see whether these reforms make sufficient difference, and we welcome the Government’s acceptance of that amendment, but that must be only the start. We badly need the long-promised reform to Companies House, and we are calling on the Government to publish that draft legislation imminently. We need to ensure that it has action on enablers and on cryptocurrencies, too.
We will need more action on golden visas. The Home Secretary has rightly made a decision to halt them, but her own statement said:
“The operation of the route has facilitated the presence of persons relying on funds that have been obtained illicitly or who represent a wider security risk.”—[Official Report, 21 February 2022; Vol. 709, c. 6WS.]
There is still no published review, no information on the number of people suspected of involvement or of posing a wider security risk, or how many of them have now become British citizens. I wrote to the Home Secretary to ask questions on that, and she has not responded. I urge her or other Ministers to explain when they will be able to do so.
Matt Western
The question I was hoping to put to the Home Secretary was very simply whether she could illustrate how this extremely important legislation, would, say in the case of Roman Abramovich, bring into effect the changes needed. It was reported to the Home Secretary back in 2019 that he was a person of interest to Her Majesty’s Government.
Yvette Cooper
My hon. Friend is right that we need clarity about how the legislation will work in practice and be used to make a difference. It raises questions about individuals, and we are all aware, as other Members have raised, that serious allegations have been made this weekend about the appointment of a Member of the House of Lords with close family links to the Putin regime.
Rushanara Ali
Does my right hon. Friend agree that it is deeply concerning that the now Lord Lebedev, despite warnings—
Mr Speaker
Order. We cannot name a Member of the other place, unless it is on a substantive motion, so that it is not personal. We must keep to where we are.
Yvette Cooper
Given the seriousness of this matter and the seriousness of the allegations that security advice from our intelligence agencies was dismissed, and given the importance of the Prime Minister always demonstrating that the defence of our national security is always his priority, it is immensely important that all the information and advice pertaining to this appointment is made available to the Intelligence and Security Committee, so that it can also scrutinise this process and examine the information it is given. The No. 1 responsibility for us all, and certainly for our Government, must be the protection of our national security.
Today we will speed through this Bill and wish it well. We want to see stronger action against Russia at this time of international crisis. We want to see stronger action against economic crime that puts us to shame and undermines our economy and the rule of law. We need action on transparency, on regulation, on enforcement and on accountability—too many areas where there has not been progress for too long. We also need action so that the UK plays our part and properly gives sanctuary to those fleeing the Russian bombardment in Ukraine. They need our support and help here in the UK, and that is not just family members, but those more widely who need our support. We must vow that never again will we allow our major institutions to be so influenced by corrupt elites and that we will give those involved in corruption and economic crime no place to hide. Be it Russia or anywhere else in the world, we will no longer stand for this here in the UK.
Mr Speaker
I start off by saying that I expect Members to take around five minutes.
Mr David Davis (Haltemprice and Howden) (Con)
Given the nature of the debate, I will try to make my simple points in three minutes. [Interruption.] There were cheers from the Government Benches, anyway.
I suspect that we will all vote for this Bill. The House is of one in wishing to stop the murderous behaviour of Putin in Ukraine and to punish him and his elite for carrying out such evil crimes against humanity. That is not to say this is a perfectly crafted Bill. To some extent, that is inevitable; it has had to be constructed in a hurry from an original economic crime Bill that was designed for a different purpose under different circumstances. Worse than that, in some ways, it is being operated by three or four Departments, some of which are operating in areas that they are not used to, which is often not a pretty sight, and I speak as an ex-Minister in that respect.
The Government, I think, will do two sensible things. First, they will accept most, or many, of the amendments that have been tabled, which is sensible because most are thoughtful and all are well intentioned. Secondly, the Home Secretary said that there will be a second economic crime Bill and of course we are making plans and projections for that. One of its functions will be to correct the mistakes that we make today, of which there will be many, because we are dealing with a difficult and sophisticated adversary and we are making decisions quickly.
Sir Iain Duncan Smith
I want my right hon. Friend to extend his speech slightly. Does he agree—I hope my right hon. Friend the Home Secretary is listening too—that whatever happens with the Bill, we are clear that those in the other place who deliberately amended previous legislation to water down the provisions that would have seen us go after many of these people, have some warning not to do that ever again?
Mr Davis
I am pretty sure that they will hear that warning when they look back at this debate.
I do not often quote Lenin, but it is probably appropriate. As he famously said,
“A bayonet is a weapon with a worker at both ends,”
which is also true of the Bill. It will do great harm to the Russian economy and to our adversaries in Russia, but it will also do some harm to us—or at least, the retaliation will—and it will particularly hit the least well-off. We will see greater price inflation, less growth, less trade and therefore fewer jobs. We must recognise that when we undertake what we are doing here. We can make Russia a pariah state but Putin will retaliate, and we must be ready. We need to be ready for fuel crises, cyber-attacks and ludicrous threats from the Kremlin.
Beyond the Bill, there are many further things that we can do in the west and we should be ready to do them. To pick one example, the allies should be ready to reduce every Russian embassy to a bare minimum—to skeleton status—by the expulsion of diplomats at the first sign of retaliatory action from Russia. It must be clear to Russia that it will pay if it retaliates again.
We have said, and we must keep saying, that the Bill is not aimed at punishing the Russian people—that is incredibly important. It should target the Russian Government, Putin and his henchmen, which is why the actions in the Bill against oligarchs are as important as the actions against Russian banks and commercial institutions. There was some briefing from Whitehall over the weekend that implied that they are not, but that is wrong.
We have all heard the rumours that Putin has something like $200 billion of personal wealth. He does not hold any of it himself; it is held by the 140-plus oligarchs around the world. Targeting them, therefore, is at least as important as targeting the Russian state banks. To do that properly, we must act fast, which is the thrust of my new clause 29, which I will speak to later in Committee.
We should not kid ourselves. This is not an economic crime Bill, but an economic warfare Bill, and it is a war that liberal democracies cannot afford to lose.
Madam Deputy Speaker (Dame Rosie Winterton)
I call SNP spokesperson Alison Thewliss.
Alison Thewliss (Glasgow Central) (SNP)
SNP Members are delighted to see this well-overdue Bill. We have called for action on these issues many times in this Chamber, in Bill Committees, in Select Committees and in Westminster Hall, yet no action has been taken until today. The measures within the Bill are far from the full package of measures that we need to tackle economic crime and we look forward to hearing the further measures that will come forward soon.
Tom Keatinge of RUSI has said:
“War has not made this money dirty—it has been here, corroding society and undermining the country’s institutions, for decades.”
The failings that we hope the Bill will address have long been identified, but have been ignored through incompetence, disinterest or worse. That goes to the heart of why the Bill is urgent. The money has been sloshing around in the UK and people have benefited from it, but they are not the ones from whom it was stolen. We need to take further action to ensure that we address that.
Stewart Hosie
My hon. Friend is absolutely right about where the money was stolen from, and many of the kleptocrats the Home Secretary mentioned made their money by looting Russia after Yeltsin’s privatisations. Does she agree with me that no matter how many times that cash has been through the laundromat, it is still stolen and is still unexplained wealth, and does she share my concern that the use of unexplained wealth orders will never actually get to the root of where some of that grubby stolen money came from?
Alison Thewliss
My right hon. Friend is absolutely correct to point that out. This money has been around the world many times and we may never ever find out where it has come from, but we could take further action to stop it coming through bank accounts in this country, helped by lawyers and accountants in this country, and the Bill does not go far enough to deal with the people who are facilitating this economic crime.
On the register of overseas entities, Members will know that I sat on the Joint Committee with the Lords on the draft Registration of Overseas Entities Bill, because I have mentioned it several times before. I cannot understand why it took so long before we had this legislation coming before us today—and in such haste, I should say. Introducing the registration of overseas entities is intended to shed light on the individuals behind overseas companies that control property in the UK, and that is welcome, but again it is too late. The proposals were discussed in detail in that scrutiny Committee, and I still do not understand—I would like some kind of explanation from the Minister, if he would stop chatting—why the Government twiddled their thumbs for four years instead of getting on with implementing such legislation.
I should note that the Scottish Government have moved on this. The register of persons holding a controlled interest in land in Scotland will come into effect and start operating, by taking names on the register, on 1 April. I seek some information from Ministers about what exactly will be the interaction between this register of property in Scotland, which includes overseas entities, and the provisions they are trying to pass today. It has been remarked by a number of organisations that the Scottish register will actually have transparency at its heart and has better transparency than what Ministers are proposing with their register. I would ask that they go to that higher level, rather than ask Scotland to level down on what we are putting on the register of persons holding a controlled interest in land.
Transparency International has estimated that £6.7 billion of questionable funds has been invested in UK property since 2016, of which at least £1.5 billion-worth has been bought by Russians accused of corruption or links to the Kremlin. When we take into account the secret nature of these transactions and how hard it is to get the actual information, the real figure is likely to be much higher.
The Bill as it stands will give the owners of about 95,000 foreign-owned properties six months to reveal their identities. I am glad that the Government have cut that back from the original 18 months they proposed in the draft Bill, but as things stand six months gives people an awful long time to move their money, down what Oliver Bullough calls the “Moneyland tunnel”, to hide those assets and to spirit them away to where they cannot be seen and cannot be found. Such secret jurisdictions will be used by the people who want to do this.
I would like to know from the Minister whether this register will be to the same standards as the Companies House register just now, because the Companies House register is basically full of guff. I have said this many times, but someone can register a company to “Anytown, Anyplace”. I could register one in the Minister’s name if I wanted to, and if I did not give any indication that I had done that, I would get away with it scot-free. The Minister really needs to tell the House what the standards of registration for these companies will be.
Our new clause 4 suggests that Companies House should be an anti-money laundering body, and it should use the Government’s Verify scheme to make sure that a person is a real person when they register a company at Companies House. I want to know what this register of overseas entities is going to look like and how we can make sure that the data put in will be maintained.
Mr Kevan Jones
Does the hon. Lady agree that full transparency at Companies House of who owns companies is in everyone’s interests? It was only because of the investigation undertaken by Caroline Wheeler of The Sunday Times that we discovered that Viktor Fedotov was one of the beneficial owners of Aquind, a company that has given huge sums of money to individuals in this House as donations. Does the hon. Lady think it would perhaps have helped some of those individuals decide whether to accept that money if they had known that Fedotov was an owner, especially because of his track record of alleged corruption in the Transneft gas pipeline deal?
Alison Thewliss
That is a fair point, and I absolutely agree. I will speak in the sanctions part of my speech about the fact that the Government do not know who has what in order to sanction them because the Companies House register is such nonsense, and we do not have a good enough understanding of who actually owns property in this country right now.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
Does the hon. Lady share my concern that there are still 11,000 companies at Companies House that do not have a person of significant control registered, yet there have been only 119 prosecutions? Surely we have to transform the regulatory power of Companies House to get rid of this nonsense.
Alison Thewliss
I absolutely agree. I was going to speak about Scottish limited partnerships later but will jump forward to that bit of my speech now, because it ties in nicely with the point the right hon. Member makes.
The House will have heard me speak on numerous occasions about SLPs, which have the distinction of being able to hold assets—property, yachts or whatever else—as a company. They have been used in the past as a means of funnelling money out of Ukraine as well other countries. OpenDemocracy reported last year that it had found €35.9 million in an SLP account which had been stolen from people in Ukraine through a fraud; Remini Consulting was the company involved in that. As the right hon. Member pointed out, the key to tracing those involved in such frauds is the persons of significant control.
SLPs have been obliged to have a person of significant control for several years now; that is a reform the SNP pushed for and the Government said they were going to introduce. Sure enough, the numbers of SLPs on the Companies House register decreased, and the number of people who were not registering as persons of significant control also decreased, but according to the most recent figures 203 companies are still SLPs with no person of significant control registered. That is just not right, and that is not being pursued either. Of all the thousands of SLPs that have existed and that still exist, only one has been issued with a fine for not having a person of significant control, and that fine was £210. That is absolutely pathetic, and it highlights that this Government are not even bothering to enforce the rules they have.
The Government are proposing in this economic crime Bill to fine companies that do not comply, but they are not fining companies that do not comply right now. That is not just about not enforcing the rules; it is money that is walking out of the Treasury—money they could have had to spend on services and do other things. They are not enforcing the rules, and they are not fining the companies that are not playing by the rules—they are not striking them off the register; they are not doing anything to make sure the rules are complied with.
This Bill does not go far enough to address that. The fines suggested are £2,500 a day, which is nothing to many of the companies who are shifting billions of pounds through shell companies. That is just the cost of doing business; it is nothing to the oligarchs with deep pockets stuffed full of Putin’s money, and the Government should be doing a hell of a lot more about that. At this moment, welcome as this Bill is, they are not doing anything to address that imbalance.
Mr John Baron (Basildon and Billericay) (Con)
I can tell the hon. Lady that there are concerns across the House on this issue, as she can see from those of us who have signed various amendments. In the last five years the number of prosecutions for money laundering has fallen away. The number of prosecutions from the Serious Fraud Office has fallen away, and the National Crime Agency has managed just five prosecutions a year on average. Does she agree that laws and regulations are only worth their salt if properly enforced, and that we need to come together on both sides of the House to address this issue and make sure moneys are available to properly fund our enforcement agencies?
Alison Thewliss
I very much agree with the hon. Member and acknowledge the strength of cross-party support in the House on this issue. I am sure he has read the Treasury Committee’s report on economic crime, which highlighted that not enough has been done on enforcement or invested in the law enforcement agencies to give them the skills that they need. Without that, the crooks will continue to be several steps ahead of the law enforcement agencies, which do not have the resources, the skills or the talent to get around these schemes and stop them in their tracks.
I agree with the hon. Member for Oxford West and Abingdon (Layla Moran) about the loophole in the Bill that she highlighted, which allows individuals or their assets to be exempted if so doing would be in the interests of the economic wellbeing of the United Kingdom. That gives the Government a whole lot of scope to exempt people from the Bill. There are clearly huge sums of money involved, and the economic wellbeing of the United Kingdom is ailing in many respects because of many things—not least Brexit—so they could look to that as a loophole. That must be closed. I do not think I got in to put my name to amendment 4 in time, but I fully support what she puts forward in it.
On sanctions, the Bill sets out a series of reforms that are likely to intensify sanctions enforcement. The SNP pushed for greater action on sanctions and their enforcement back when the Sanctions and Anti-Money Laundering Act 2018 was going through the House. There are limitations for the Office of Financial Sanctions Implementation: as I mentioned earlier, when we do not know where people are hiding their money, it is difficult to track them down, impose sanctions on them and enforce those sanctions. A great deal more needs to be done in that regard as well. As my colleague on the Treasury Committee, the hon. Member for Wallasey (Dame Angela Eagle), mentioned earlier, the OFSI has only 37.8 staff, which does not seem sufficient to the size of the task it faces. I hope that it will be able to get more resource to do that. Clearly no one could have quite anticipated the scale of the current sanctions, but it needs further resource for sanctions, both so that it has the expertise it needs and to ensure that our sanctions are aligned with those of other jurisdictions around the world.
Finally, according to figures put out at the weekend by the Minister for Brexit Opportunities and Government Efficiency, although the UK’s sanctions are only a fraction of the EU’s or US’s efforts, they have captured more in value than either of them. That is an interesting and curious point, and a serious one if it indicates how much Putin-related cash is swilling around in London’s economy. If the figures are to be believed, the UK has more in assets belonging to oligarchs than the EU and the US combined, which really shows us the scale of the problem that the UK Government have got themselves into.
The SNP supports the measures in the Bill that will strengthen measures on economic crime. Although they do not go far enough or fast enough, they are long overdue. We look forward to moving some amendments later this evening—and, if the Government have any sense at all, they will accept them.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I am going to introduce a five-minute time limit. However, I am sure that right hon. and hon. Members will be aware that, if they take less time than that, we will get to Committee stage more quickly, as they might wish to do. Those who particularly wish to speak in Committee might bear that in mind as well.
Sir Robert Neill (Bromley and Chislehurst) (Con)
Thank you very much, Madam Deputy Speaker. This is an important Bill, and it is an exceptional Bill because this is not normally the way in which we go about dealing with such matters, but it is necessary. My right hon. Friend the Member for Haltemprice and Howden (Mr Davis) spoke of it as an economic warfare Bill. Sadly, there is an element of that, because a vicious and genocidal war is being waged in our own continent and, as a law-abiding country that believes in the rule of law, we have necessarily to take actions perhaps not in the way we normally would.
Some aspects of the Bill involve, for example, the removal of a proportionality test in the seizing of assets. In the case of the acolytes, fellow travellers and hangers-on of the Putin regime that is murdering people, it is perfectly proportionate to move swiftly and immediately, but that might not be true in all the other cases in which entities are held in this form. Although none of us is going to delay this Bill today, I hope that the Minister will reflect on whether the second Bill that will come along, which I welcome, may give us a better chance to look at whether that approach is appropriate as a global provision, as opposed to one that is specifically targeted in this instance. There are legitimate business grounds for why assets may be held in various forms of entities that will be caught by the Bill. We do not want to destroy our ability to do that in this country, but at the same time, we want to prevent abuse.
I also welcome what has been said about strengthening the enforcement provisions. We need to do much more on economic crime. The Justice Committee is conducting an inquiry on fraud at the moment, but we need to look at crime internationally as well. Our reputation both as a financial centre and a legal centre depends on that, but that involves our committing the money in a way in which, for example, the United States does to a far greater degree for economic and extraterritorial matters.
The fact that, unlike us, Russia is not a country that abides by the rule of law could not have been more amply demonstrated by its non-attendance at the International Court of Justice in The Hague today. It is a measure of the regime’s arrogance that despite being party to the genocide convention and having signed up to the ICJ’s jurisdiction, it does not even bother to turn up and has the brass neck to suggest, wholly falsely, of course, that it is defending Russian speakers against genocide. It is a measure of the perversion that has taken over the Russian state. Regrettably for those of us who love Russia’s culture and history as a European nation, under Putin it has become almost as much of a rogue state as the mullahs have made Iran. We therefore have to act with exactly the same rigour to destroy it economically. That will bring awful pain to the people of Russia, which is terrible, and it will bring a considerable amount of pain to many people in this country and beyond. Sadly, however, that is the price that we will have to pay to ensure that a genocidal, homicidal dictator, who has clearly never changed from being the KGB torturer that he once was, will not be able to blackmail us going forward.
On the Bill’s specifics, I hope that the Minister will look at some of the amendments, including a number of important technical amendments that have been suggested by the Law Society and which merit being looked at in Committee. We must not forget, for example, that those who have significant control are not necessarily the same as those who have beneficial ownership. There is a risk of a loophole that needs to be tightened up. It is really important, therefore, that we ensure that the various registers that are now being created align sufficiently so that we actually get to the economic beneficiaries of the trusts, rather than the intermediaries who might be dealing with it. That is where the oligarchs, in this case, and the criminals are likely to be.
It is also particularly important to look at the timeframe. Six months for registration seems needlessly generous. Equally, 28 days is too short, because we must bear it in mind that legitimate businesses will hold their assets through these entities and formulas, and we need to give them time to register. I say to the Minister that if, in the other place, there was an amendment that brought that time limit down to three months, many of us think that that would strike the balance very sensibly. That would enable legitimate businesses to register properly, but it would still put the pressure on the villains who we would really get to. I hope that the Minister will think about that.
Subject to that, I commend the Bill to the House. This is actually a fight not just for democracy and decency, but for the rule of law, and that is why we must get the Bill through.
Dame Margaret Hodge (Barking) (Lab)
I will try to keep my remarks short. Like others in the House, I welcome the Bill, but it should never have taken the nightmare of a war in Ukraine for us to act and to halt the avalanche of dirty money that has been allowed to enter Britain today. We are the jurisdiction of choice for not just Russian oligarchs, but kleptocrats, money launderers, people traffickers, smugglers, terrorists and other villains. That is the result of the failure of this Government and previous Governments to act. The Labour Government also had some responsibility for this, but the inaction over the last decade or so is down to this Government and the previous Conservative Governments.
As every other hon. Member has said, the Bill has to be the first step. I look forward to a further Bill coming forward swiftly at the beginning of the next Session so that we can enact other important measures. The other point that other hon. Members have made is that the Bill is not something great or inventive. It was first promised to us by David Cameron; I think that was in 2015, although others think it was 2016. There was then a massive consultation, pre-legislative scrutiny and a Bill in 2018. It was in the Queen’s Speech in 2019 and reinforced in the G7 summit in Cornwall, and then we heard that there was not going to be an economic crime Bill. It was all gone, and then war came in Ukraine and suddenly it has re-emerged.
The implications of the Bill go well beyond Ukraine, although the Bill is vital as we try to put pressure on Putin and his utterly dishonourable gang of cronies, and to de-escalate the conflict through economic sanctions. We need to move faster and go further. Some very important amendments have been tabled; I will not use my time on them now, because hon. Members will want to talk about them in Committee, but they include freezing an oligarch’s assets while lawyers consider the case for sanctions, and ensuring appropriate funding so that we do not just put something into law without using it to go after the oligarchs properly.
Mr Baron
Is the right hon. Lady as concerned as I am that some estimates put the cost to this country of economic crime at nearly £300 billion, yet we spend something like only £850 million on all the nationwide enforcement agencies? Other countries spend a lot more and seem to have a higher prosecution success rate. Is that a coincidence?
Dame Margaret Hodge
No, of course not; I completely concur. The latest figure I have seen for the cost of economic crime to the economy is £260 billion, so the Government must provide tougher regulations, more effective enforcement, proper resourcing and clear accountability—those are the key things we need.
I thank the Government for listening to our representations. Even the Bill before the House includes some very welcome changes, such as tougher penalties and greater accountability, with an annual report to Parliament—I remember arguing that case as the legislation went through, and it being resisted. The Government’s new clauses will speed up the processes, and I hope that in Committee there will be further improvements.
When the Minister winds up, will he say whether he has looked at amendment 3, which stands in my name and that of other hon. Members? It would address the loophole that I think the hon. Member for Bromley and Chislehurst (Sir Robert Neill) mentioned; I think it is a drafting mistake, but it looks as if individuals could escape the transparency that the Bill intends by using nominee directors and corporate trust providers. We have received legal advice, a copy of which I have shared with the security Minister; I wonder whether the Minister answering this debate has looked at it and whether he will respond on the drafting issue.
This is not an economic crime Bill; it is important legislation that should have been put in place years ago. The economic crime Bill is still desperately needed and I look forward to urgent discussion of it. In the meantime, I hope we will have time for the proper consideration of our amendments.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak in this debate and to follow the right hon. Member for Barking (Dame Margaret Hodge), whom I join in welcoming this long-delayed Bill. I think I have co-chaired the all-party parliamentary group on anti-corruption and responsible tax for nearly seven years; as she says, we were promised this measure six years ago. The irony is that at the time the Government were ahead of the curve, and probably ahead of the world, in coming up with such measures. If we had only had these rules in place and these disclosures available to us now, we could have moved so much faster in this crisis. I wholeheartedly welcome them today and support them all.
I just want to take a few moments to disagree slightly with some comments that have been made. The transparent register of overseas entities is not about economic warfare; it is a perfectly normal and necessary measure to ensure that we have a clean economy free of dirty, criminal and corrupt money. It should not be seen just as a measure for this crisis, but as a measure for life. It is needed for our economy, and it is not intended to be an attack on investors who are perfectly normal and acting properly. It will catch Americans, Australians, Canadians and Europeans; anyone who has property in this country owned by a company will be caught. They are still welcome to come here. We want them to come here, invest here and create jobs.
What we do not want is dirty, corrupt money. People involved in that can sling their hook—they can go. That is what these sanctions are aimed at correcting. People who are coming here to invest have nothing to fear if they are doing nothing illegal—that is what we want. Please, let us not pretend that this measure, which has been planned as an anti-corruption measure for all these years, is solely one for this crisis. I hope it helps in this crisis and that somehow we find some property owned by an oligarch or two that we would not otherwise have found, and we can freeze or sanction it. I suspect that this measure will not make much difference on that. If we do not know what assets they have got already, through our intelligence services, and we cannot get those sanctions and freezes in places quickly, I suspect that having a register in place in a few months’ time, which these people may or may not comply with, is not going to make a lot of difference.
Sir Robert Neill
My hon. Friend makes a good point: this is not just for this crisis. He will have seen the excellent article in The Spectator by Professor Richard Ekins, where he and Sir Stephen Laws, the former Junior Treasury Counsel, suggest that the best route for this crisis would have been a stand-alone Bill naming all those to be sanctioned in a schedule and with power for that to be added to. That is not what we have, so the reality is that we are going to have to get this Bill through and perhaps think about that better approach, should such eventualities arise again in the future.
Nigel Mills
I agree with my hon. Friend, but that matter is beyond my expertise or interest; my interest is in anti-corruption measures here. I welcome the fact that we have this Bill, but I am nervous that the speed of its drafting and some of the technical provisions may lead these provisions not to work as they should. The people we are most after are not the innocent businessmen who have chosen to arrange property or a company here; we are after the really dodgy rich ones who will use every bit of machinery they have got and may well be able to find some loopholes and ways of exploiting this.
The Bill requires the registration of the beneficial owner of the company that owns the property, not the actual property itself. That may sound like a distinction without a difference, but I suspect that ways can be found, through nominees and careful shareholdings, where those two things can be distinguished. So we need to watch carefully as we bring these provisions in to ensure that they are hitting the people we think they should hit and getting the disclosures we want. If we are not getting them, we need to come back quickly and tighten the rules, changing the provisions and tweaking them. We must not just think, “We have done this today; that’s it. It doesn’t matter. We have got a few thousand registrations.” All the innocent ones may be there, but we may not have got the important ones. That is where we need a huge culture change in the City, in the government and in the law enforcement agencies, where people know that Parliament is now serious in saying, “We mean these provisions to have effect. We want you to enforce them, and we want them to work and to be resourced.” We do not want them on the statute book only then to be ignored, with their being a bit of a deterrent and it not mattering whether they are used or not. We want this stuff to make a huge culture change to our economy and we want it to happen quickly. I commend the Bill and I look forward to the rest of its stages.
Layla Moran (Oxford West and Abingdon) (LD)
It is a pleasure to follow the hon. Member for Amber Valley (Nigel Mills), and I associate myself with his comments. Although, as the right hon. Member for Barking (Dame Margaret Hodge) said, it has taken a war for us to get to this point, I find myself forgetting how often I go to other countries and speak to people there, or speak to family members who live abroad, who say how they look to this place for what should be best practice. Yet when it comes to tackling economic crime we have been lagging behind. The Secretary of State said that this was done speedily, and I am reminded of when I was a teacher and people used to stay up all night to do the homework I had set three weeks earlier. The Government could have done this better and sooner, and they did not, but we are here now.
Kim Johnson (Liverpool, Riverside) (Lab)
The hon. Lady is making an excellent speech. Does she agree that actions speak louder than words? We have had an awfully long time to get this right—it goes back to 2016—so let us see some action, and action now.
Layla Moran
I thank the hon. Lady for her intervention, and she is right. I do not say this in any other spirit than one of wanting to help. I thank the Ministers for the ways in which they have engaged with us, and I will keep working constructively with the Government on this, because we need to get it right, and not just for the people of Ukraine. Before I came into the Chamber today, I was talking to some Russians in Russia. I cannot name them and will not do so, because if I did, it would put their lives in danger. Members will be aware that on Friday Putin put in place legislation to give them 15 years’ imprisonment for simply saying that Putin is waging a war, as opposed to an exercise or a peacekeeping mission. They describe what is happening as strict and cruel legislation designed for political oppression, and they are asking Members of this House to work with the Russian community here in the UK to get the message out through their networks and to their friends about things such as how to circumvent Putin’s internet clampdown in Russia in order to get the BBC in Russian to people on the ground. There is something that all of us can do to help those Russians who want to help us here, and who are desperate not to be tarred with the same brush.
I look forward to the Committee stage that will take place later this evening, so I shall be brief, but I would love to hear from the Minister what exactly will be in the economic crime Bill part 2, especially in relation to the Companies House reform that we seek. I also want to associate myself with what has been said about enforcement. When I asked doughty third-party groups such as Transparency International and the Royal United Services Institute why other countries—America, for instance—had managed to include far more companies and individuals on their lists, I was told, “They have fewer laws, but they enforce the hell out of them.” Can we please be a country that enforces the hell out of this and any further legislation that we might want to introduce?
We also want to ensure that the second Bill clamps down on enablers. Amendments have been tabled to that effect, but we know that stand-alone legislation will be required for this purpose. It is not just the lawyers who are involved; it is the PR firms, the accountants, the banks, and all the others who knew what they were doing. It should not be ‘a case of acting “recklessly”—there are some get-out clauses in this Bill that we need to be careful about—because those people knew or decided to turn a blind eye, and that can no longer be good enough. I appreciate that this cannot be covered in today’s Bill, but when will it be covered?
I look forward to working with the Minister in future iterations of these matters, and I especially look forward to the Committee stage, when we shall be able to discuss some of the holes in the Bill in more detail.
John Penrose (Weston-super-Mare) (Con)
At bleeding last! It is here. We have been waiting for years. Alleluia! It has finally arrived.
We have all heard some of the history of how long we have been waiting for the Bill, but it is also true to say that a few years ago Britain was at the forefront of this legislation. In fact, in some respects we are still the one-eyed man in the land of the blind. There are still many other countries that have not taken even the initial step of introducing beneficial ownership transparency, which we have long had in this country. But—and it is an essential “but”—because we have the City of London and the wholesale financial markets that are the envy of so many countries, we have to live up to a much higher standard than other countries, and that means that we have to go further.
We know that we have loopholes in our existing laws, and it is well past time for us to plug them. The Bill is the first step on that road, but it is only a first step, and I was delighted to hear the promise of more in the White Paper and the promise of a second Bill. Like the right hon. Member for Barking (Dame Margaret Hodge), I hope that that will come early in the next Session, because only if we do both those things in parallel and in tandem will we finish the job that was started back in 2015 or 2016, depending on which version of history we adhere to.
I am also delighted at the acceptance of the manuscript amendment tabled in my name and that of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), which aims to speed up the application to deal with the oligarchs who own property in this country and will even now be searching for buyers to palm the assets on to so that they can get their money out, because they know that we are moving and also know that, as matters currently stand, they have some time to complete their transactions. It is vital that we move faster, and I am delighted that we will have a chance to consider the manuscript amendment.
Bob Stewart (Beckenham) (Con)
I thank my very good friend for allowing me to intervene. I hope and presume that this Bill will freeze assets; will the second part of the legislation, when it comes, allow their confiscation? I hope that it will, in which case we might even put it to good use and help the people of Ukraine. Is that out of the question?
John Penrose
That is a question that I think the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), who I know is listening carefully, will be able to answer in his summing up. To the point raised by my right hon. and gallant Friend the Member for Beckenham (Bob Stewart), we cannot sanction an oligarch’s cash if we do not know where it is, so the essential initial step is to rip back the veils of anonymity so that we can find it, so that we know what we are looking at and so that we can at least stop it leaving the country before we move on to those other steps.
There are two other points that I hope the Minister can address in his summing up. They relate to things that could be in the Bill but are not. I hope that they will appear later or that they will appear in the follow-up Bill that we are being promised. The first is the need for proper measures to deal with whistleblowers. We have heard a great deal already about the importance of enforcement. Enforcement is vital, but it is so much faster and so much better applied if proper whistleblowing legislation is in place. As with transparency of beneficial ownership, a few years ago this country’s legislation on whistleblower protection was among the best in the world, but the world has moved on and other countries have overtaken us.
We urgently need to improve the quality of our whistleblower legislation. It is good that the Minister who will respond to this debate is from the Department for Business, Energy and Industrial Strategy because it is in his Department that the whistleblowing team sits. I fear that it is well behind the curve of where it needs to be if we are going to move promptly on this. We have a long way to go and a great deal of thinking to do, and I hope that he will be able to make some commitments when he gets to his feet at the end of this Second Reading debate.
Kevin Hollinrake
New clauses 14 and 27 both deal with the establishment of a commission for the protection of whistleblowers to do exactly what my hon. Friend is setting out.
John Penrose
I acknowledge that point. I am not sure whether the Government will be able to accept those proposals, but if they do not, I hope they will be able to make some commitments about what they intend to do very soon to plug the undoubted gaps.
My final point is about trusts. My hon. Friend the Member for South Thanet (Craig Mackinlay) intervened on the Home Secretary to make a point about trusts, and it is essential that we do not forget that one of the issues we are dealing with here is to do with companies, because they have been proven to be an excellent vehicle for covering up the ownership of assets. We have also heard from the hon. Member for Glasgow Central (Alison Thewliss) about the problems that have accrued for Scottish limited partnerships. It is equally true that trusts could be, and potentially are being, misused in exactly the same way. This legislation does something on the use of trusts when it comes to unexplained wealth orders, but it does not do the same thing for the disclosing of the settlers, the trustees and the potential beneficiaries of trusts for everything else. Those vehicles could easily be misused, and we do not want to come back in a couple of years saying, “If only we had thought to plug that loophole at the same time.” I hope that my hon. Friend the Minister will be able to deal with that omission and promise us some progress on that very soon.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I have no problem with interventions, but it would be helpful to other colleagues, especially if the House wants to get on to the Committee stage, if Members could stick to their five minutes even if they take interventions.
Peter Dowd (Bootle) (Lab)
The Bill is a first step, but the proof of the pudding will be in the eating. It should not have taken the tragic and brutal invasion of Ukraine to see Government action on economic crime. For too many years, we have heard only warm words from the Conservatives. Our British overseas territories are often at the centre of these networks of dodgy financial flows, depriving citizens everywhere through tax avoidance and evasion. We have become the No. 1 safe harbour for criminals and kleptocrats the world over, and that is a shameful record. Despite this, part 1 of the Bill, on the registration of overseas entities, has sat on the statute book in draft form since 2018. Why? Indeed, only a couple of weeks ago, the Government had pulled their economic crime Bill from the legislative calendar altogether.
Because they have avoided this matter for years, the Government are now forced to rush this complex legislation through in a day. Over that same period, Labour Members have repeatedly requested for today’s register to be introduced, along with several other corporate transparency measures proposed in our tax transparency enforcement programme. We have also called repeatedly for the introduction and strengthening of Magnitsky provisions. No one knows quite what has influenced the Government’s dither and delay on economic crime. Coincidentally, lawyers at the Good Law Project surveyed Russian donors to the Conservative party at the weekend and found that not a single one has been included on the sanctions list. Perhaps that is pure chance, but perhaps not.
The register is crucial to demonstrating how UK property is still used to stash illicit wealth. Transparency International has identified that £1.5 billion-worth of property in the UK has been bought by Russians accused of corruption. The glaring hole in part 1 of the Bill was the 18-month transition period for the full register, which has been reduced to six months. Nevertheless, six months is plenty of time for people to dispose of assets through their army of lawyers—we have called for 28 days. Does the Minister accept that six months is untenable?
A coalition of organisations including two all-party parliamentary groups, Transparency International and Tax Justice UK suggest amending the money-laundering regulations to strengthen due diligence on property transactions in the interim. This is one way of limiting the obvious get-out offered by a six-month compliance timeframe.
The sanctions for failing to comply with the register are not sufficient either, given the plentiful resources of those who wish to avoid the spotlight. The Government have again sought to address this via amendment. One wonders why they sought to introduce such a lax framework in the first place.
Clause 18 gives wide powers to the Secretary of State to exempt individuals from the register. In particular, the exemption
“in the interests of the economic wellbeing of the United Kingdom”
seems pretty dubious. Can the Minister give examples of circumstances in which such exemptions will be applied? After all, many of the people who will hopefully be targeted are ostensibly in this country because it is in the interests of the economic wellbeing of the UK. What has changed?
Clause 4 allows for a statement to be provided to the register that does not identify the beneficial owner of an entity. Why? Little guidance is given in the schedules on the circumstances in which such a move would be appropriate. I cannot think of many such circumstances, so will the Minister enlighten the House? Allowing lawyers to submit excuses in place of a beneficial owner will surely be a major stay-out-of-jail-free card, almost literally, for anyone hoping to maintain their secrecy. This provision should be removed or much more narrowly defined.
Finally, there is the matter of our Crown dependencies and overseas territories. While serving as shadow Chief Secretary to the Treasury, I was among the many calling for public country-by-country reporting by multinational companies, to ensure they are not engaging in tax avoidance. Public reporting has still not been brought forward by the Government, despite the clear support of this House. We cannot allow the Crown dependencies and overseas territories to be used to undermine stronger rules on beneficial ownership in Britain.
I hope hon. Members think hard about this, and that this has not just been a Damascene conversion at the last moment. This awful war shows that the Conservative party can no longer dither and delay. The time for half measures has long passed. We must now act fully and decisively to end the UK’s reputation as a sanctuary for economic criminals.
Saqib Bhatti (Meriden) (Con)
I refer to my entry in the Register of Members’ Financial Interests as a practising chartered accountant and auditor who has worked on and helped to design many anti-money laundering schemes with companies.
Before I address the merits of this excellent Bill, I will speak about my visit on Friday to the fantastic WMG Academy for Young Engineers in Smith’s Wood in my constituency. I was subjected to what I can only describe as an impromptu interrogation by 10 of its exceptionally talented students. I was struck by how the phrase “world war three” kept coming up in the discussion. The third time it was mentioned, I asked the students whether they thought world war three is inevitable, and I saw a row of nodding heads.
This Bill is incredibly important, and we should not underestimate what today means to my constituents and to many people across the country. The Ukrainian people have shown immense bravery and honour in how they have dealt with the Russian onslaught. Thanks to the free press across the western world, journalists and social media, we can see in real time the great tragedy that is unfolding before our eyes. The indiscriminate shelling of residential areas has destroyed not only buildings but lives and dreams. The callous bombing of refugee corridors, residential areas and non-military targets has resulted in the murder of innocent people across Ukraine. Even as we speak, the Ukrainian people are losing their families, children and loved ones. The carnage they are experiencing will be another sad chapter in a long history of brutality in Europe—a brutality that we had all hoped we had left behind.
War is unpredictable. The slightest miscalculation could see an escalation that could lead to greater devastation and spill over into a larger global conflict. That is why this Bill, today, is so important: we in the west need to do everything we can to ensure that Vladimir Putin realises, or is made to realise, the magnitude of his miscalculation so far. The people whom he has bankrolled, and who have in turn enabled him to be an international murderer and thug, need to know that in future they will not be able to do so without repercussions.
The sanctions regime, along with the measures taken with our international partners, means that the package we are imposing has some of the most severe sanctions Russia has ever experienced. In particular, the removal of the test of appropriateness in the designation of individuals and entities and the removal of the constraints on designation by description will mean that groups such as the Russian Duma and the Russian Federation Council can be sanctioned much more quickly.
I particularly support the reduction in the transition period for the registration of the beneficial owners of overseas companies. I know the issue has been the subject of much tension, but sufficient time must be given in order that the changes can be effective. Companies House must have in place a regime to police the register. It should not take too long to register new changes, but it may well take some time to get ready a detailed register that goes back in time.
I hope that when he responds the Minister will give some further detail on the resources that will be allocated to ensure the effective functioning and policing of the register. Perhaps he will also clarify what personal data will be needed, or whether similar thresholds will apply as apply for persons with significant control. Will exemptions for the data provision exist, as they do in respect of the UK register of people with significant control?
Every piece of legislation that we pass in this House serves a great purpose. Over the weekend, I reflected on the comments of the students I met on Friday. After the uncertainty of covid, they were clearly grappling with the uncertainty of a global conflict, as many of us are. The Government have led the way on standing with the Ukrainian people. We have given them military support and medical support and, through this Bill, we will be able to ensure that there are some of the strongest economic repercussions for those who flout international law.
We in this House have made it clear that this barbaric war against the sovereign, democratic and free nation of Ukraine cannot be ignored. If it were to be ignored, there would be grave consequences for the free world. We must do all we can to avoid further conflict but be resolute in our actions. This Bill sends a clear message today: we will not stand by and let the ideology of a 21st century despot prevail over the rights of a free, democratic nation such as Ukraine.
Andy Slaughter (Hammersmith) (Lab)
I am sure we all agree that the Bill is urgent and that it is good as far as it goes, but it is inadequate because it has been hastily drafted, and it was hastily drafted because the Government dragged their feet.
If I understood the Home Secretary’s argument earlier, it was that the number of amendments that have been tabled shows the degree of support for the Bill. The number of amendments shows the gaps in the Bill and its inadequacies. Hopefully, we will correct some of them in Committee later, but I would like to hear from the Government which of the amendments they propose to accept. If they do not intend to accept them on technical grounds, I would like to hear them at least give assurances that during the Bill’s passage they will bring forward their own versions of the relevant measures.
I said earlier to the Home Secretary that there is a gap between the rhetoric and the reality. I was thinking of a briefing given to the Financial Times last week on the same day as the Bill was published, which said:
“UK cabinet minister Michael Gove is drawing up plans to seize British property owned by Russian oligarchs with links to President Vladimir Putin, without paying them compensation. Ukrainians fleeing their homeland could be housed in the lavish UK residences of oligarchs hit with sanctions under the proposals discussed by Gove”.
I do not see very much of that in the Bill.
What we have seen was initially 18 months and now six months to publish information. Yes, there will be penalties for the failure to publish that information, but there will also be ample warning and time to either disburse or transfer those assets. Whether the Government accept the proposal from the Chairman of the Justice Committee, the hon. Member for Bromley and Chislehurst (Sir Robert Neill), that it should be three months, or our proposal that it should be 28 days, that period has to be cut down.
In addition to that—I am looking at new clause 29, tabled by the right hon. Member for Haltemprice and Howden (Mr Davis)—we need the early freezing of assets to prevent them from being dissipated during that period. The Government, if one believes their own briefing, think that we should be seizing those assets. Where are those proposals? Where is the comprehensive coverage of people whose assets can be frozen and what assets there are likely to be? How are they going to drill through the elaborate network of shell companies in order to do that?
That brings us on to another point that is absent from the Bill: regulation and enforcement. Let us be clear: we need not more enforcement agencies, but the ones that are there to work properly, and the National Crime Agency and the Serious Fraud Office do not. That is partly because of a lack of funding, partly because they need staff of a higher quality and ability, and partly because of the revolving door between those agencies and defendant law firms, which goes on all the time at the moment. We have got to the stage now where the Attorney General has ordered an investigation into the head of the Serious Fraud Office because cases are collapsing, or because the wrong targets are being pursued—the minnows rather than the sharks. Indeed, we have the absurd position where the Serious Fraud Office itself is a target of SLAPP—strategic lawsuit against public participation—litigation by the Eurasian Natural Resources Corporation.
I hope that we will have time to discuss the amendments of my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) on preparing legislation on SLAPP and on protecting whistleblowers. These are difficult things to do. Oligarchs are entitled to lawyers, but they are not entitled to misuse the law in this country. This legislation requires careful drafting, as will the seizure of assets. These are draconian and dramatic steps that our courts are not used to taking. To make sure that they are watertight, but also fair to all parties, the measures require careful drafting; they must not be done at the last minute on the back of an envelope.
I was delighted to see Tom Burgis win his case against ENRC last Wednesday. It shows that, if they are given the tools, our courts are prepared to stand up in that way. I was astonished to read this comment by the losing party, ENRC:
“We have seen a growing campaign of xenophobia pervade aspects of the media and parliament that targets individuals and companies based on their nationality, including bizarrely ENRC, which is a UK company with Kazakh shareholders.”
I do not think that Tom Burgis is anti-Kazakh and that such prejudices were driving him when he wrote his book, “Kleptopia: How Dirty Money is Conquering the World”. On the contrary, he was doing us all a service. The Government need to rise to the challenge now. It does not help if they are not clear on where the donors to the Conservative party are coming from at present.
Bim Afolami (Hitchin and Harpenden) (Con)
Many of my colleagues— interestingly, more on the Conservative Benches—are fond of quoting Lenin these days. My right hon. Friend the Member for Haltemprice and Howden (Mr Davis) did so earlier. One Lenin quote goes something along the lines of, “History needs a push.” It does feel that the march of history, regrettably, by the actions of Vladmir Putin, has given us a push. It has given this economic crime Bill a push. But it is important that we bear in mind the words of my hon. Friend the Member for Amber Valley (Nigel Mills) in his excellent speech that this legislation is here for the long term. This is not dependent on what is going on in Ukraine, regrettable though that is. Some of the actions that the Government have rightly taken are temporary and designed to deal with the Ukrainian issue. But this is for the long term. Many Members on both sides of the House have worked for that and we need to bear that in mind as we legislate.
On the register of overseas entities, in my view, the proposed requirements will not disincentivise honest investors into the British market. We are a place that is open for business. We are pro-business, but we want clean money and this Bill completely bears that in mind and does the right thing.
I also want to push back on some colleagues who have picked up on Opposition amendment 12, which talks of setting up the register of overseas entities within 28 days. All of us want this to happen as soon as possible, but I fear that many in the House underestimate the challenge of turning Companies House—we have heard lots of war stories about various things at Companies House that are not as we would like them to be, and I would agree with those—from effectively an administrative office into something like a quasi-regulator. That is hard. It will take time.
There are those who say, “Well, you should legislate anyway and force Companies House to do it quickly.” Yes, we could; we could force it to do that tomorrow, but the next day, when our constituents, the media and various other people said, “Why is Parliament not enforcing the law it has passed?” the reason would be that we were not capable of doing it through Companies House. To some degree, these things are arbitrary, but I think six months is a fair period in which to do those things. Of course, I will listen carefully in Committee to what the Minister says from the Treasury Bench.
I have a couple of technical points for the Minister. The first is whether, in focusing on the holding and transferring of qualifying interest in land as a trigger point for this Bill, the Bill captures sales of property-owning companies—share sales, not asset sales. That is one point that should be cleared up. Secondly, does the Bill cater for nominee arrangements that could allow the purpose of the overseas register to be easily evaded? That would be an interesting point for the Minister to clarify.
The Office of Financial Sanctions Implementation has come up in the debate. The really good and important thing the Bill does is to move us from a position where the office could only impose penalties if an individual
“knew or had reasonable cause to suspect”
that sanctions would be breached, to a strict liability position where, if the sanctions are breached, people can be fined. That is the right approach, it is overdue and I commend the Government for taking it.
Speaking as somebody who was formerly in the City of London as a lawyer, as an adviser and in a bank, it is important that the City of London helps this House and the Government to take a lead here. The world is looking at the City to see whether it can put these things in place in a co-operative way, and by that I mean everybody from the institutions to the advisers and all the rest. Morals and markets need not and should not be mutually exclusive. That is of critical importance.
We are all politicians—indeed, we are all human beings; those two things are not always mutually exclusive either—and there are heightened tensions in this House and across the country. While we legislate, we must bear in mind the rule of law. When we talk about seizures of assets, that is a serious business that should never be done on a whim. This Government, with this Bill and the other measures, have struck the right balance between doing what we need to do and ensuring that we are seen to be sensible, proportionate and within the rule of law. Without that, we lose everything.
Mr Kevan Jones (North Durham) (Lab)
I too welcome the Bill, but it angers and saddens me that it has taken the invasion of a European sovereign nation, and the fact that women and children in Ukraine are being bombed as we speak, to bring it forward.
We have heard the hon. Member for Weston-super-Mare (John Penrose) say that this Bill is about closing “loopholes”. No, it is not. This situation is because of a choice that was made. My right hon. Friend the Member for Barking (Dame Margaret Hodge) said that action should have been taken earlier, and it should have been. The ISC, the Committee I sit on, said in its annual report of 2019-2021 that
“the extent of Russian influence in the UK is very clear—the previous Committee found it to be ‘the new normal’, as successive Governments have welcomed the Russian oligarchy with open arms. As a result, there are a lot of Russians with very close links to Putin who are well integrated into the UK business, political and social scene… Yet…few, if any, questions have been asked regarding the provenance of their considerable wealth and this ‘open door’ approach provided ideal mechanisms by which illicit finance could be recycled through the London ‘laundromat’”.
This situation has not happened by accident; it has happened because we have had a Government who have turned a blind eye to what is going on. It now comes as a great shock to some people that we are going to have to legislate. The Prime Minister says we are going to bring in the toughest sanctions against oligarchs, and the hon. Member for Meriden (Saqib Bhatti) has repeated that we will have the toughest rules in the world. No, we will not, because this Bill will not do that. We will have another economic crime Bill to bring in further legislation, but this issue has been around for years and this Government have turned a blind eye to it. It is no good crying crocodile tears for the people of Ukraine and saying that we are going to react now, when we could have reacted years ago and this Government took a political choice not to.
As the hon. Member for Oxford West and Abingdon (Layla Moran) said, this is also about having the right culture of enforcement, which we do not have. The hon. Member for Amber Valley (Nigel Mills) is correct that it is not just about Russian oligarchs; it is about cleaning up the entire system. For the past 10 years, the right hon. Member for Haltemprice and Howden (Mr Davis) and I have been campaigning on landfill tax fraud—another area that has been completely ignored. This Government have had a light touch on economic crime.
The security implications of the money that is around Putin were well documented in the ISC’s Russia report. All I will say—because I cannot say any more—is that this is further well documented in evidence in the secret annex, which will not be published, quite rightly, for security reasons. The Government say, “We don’t know who to go after; we don’t know what the actual extent is”, but they do.
As my hon. Friend the Member for Hammersmith (Andy Slaughter) said, as part of the will to have enforcement, we must ensure that any of the measures in the Bill are properly financed. It is no good the National Crime Agency taking a knife to a gunfight when going up against some of these individuals. That is exactly how it has been described to me by some of the individuals who work for the National Crime Agency. When I asked the Home Secretary whether she had extra resources for the NCA to implement these measures, she ducked and weaved around the answer. Without that, these measures will not be effective.
If we want a lasting testimony to do something really good and ensure that the people now suffering in Ukraine know that we are doing everything we possibly can—not the glib words of the Prime Minister, which we know are just soundbites that do not stand up to a great deal of scrutiny—then we need to ensure we bring in this Bill and very quickly bring in any other provisions to stop this illicit finance. That not only will have an effect in this area but—I agree with the hon. Member for Amber Valley on this—will clean up this country, and that is long been overdue.
Peter Gibson (Darlington) (Con)
I welcome the Economic Crime Bill and am pleased that the Government have brought it forward. It will bring in measures to allow us to better prevent and combat the use of land in the UK for money laundering purposes, cracking down on the ability of foreign criminals to hide behind secretive shell companies and revealing the identities of the true owners of land in the UK. That will put us in a position to ensure that our sanctions against Putin’s Kremlin regime will have a real impact.
The Government have already brought in targeted sanctions aimed at crippling Putin’s regime, and this Bill will enable us to go even further. In amending the Sanctions and Anti-Money Laundering Act 2018, the Bill will streamline current legislation, allowing us to respond even more swiftly and effectively to sanction oligarchs and businesses with links to Putin’s regime. Merely making it clear that these measures are being brought in will have an immediate dissuasive effect on those who seek to commit economic crime in the UK.
By creating a register of overseas entities that requires anonymous foreign owners of UK property to reveal their real identities, the Bill will help to address the risk of money laundering through our property market, making it clear to foreign criminals that there is no longer anywhere to hide. I am pleased that the Government have tabled an amendment to ensure that those who do not comply will face real penalties, with fines and imprisonment. However, I urge Ministers to ensure that all these measures apply not just to businesses but to discretionary funds where the beneficiary is not known—a point ably made by my hon. Friend the Member for South Thanet (Craig Mackinlay). We must ensure that there is nowhere to hide.
I note the concerns about the length of the transition period for retrospective registrations for overseas entities. Businesses are not automatically bad just because they are owned by an overseas entity. Some 95,000 properties in the UK are owned through about 30,000 overseas-registered companies, and only a tiny number of these will be owned by corrupt individuals linked to Putin’s regime. I welcome the proposals from my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) to stop avoidance in the coming six months. The Home Secretary has acknowledged my hon. Friend’s work in that area.
The Bill builds on the work we are doing to crack down on illicit finance and economic crime. I am pleased to support it and the measures it contains, but I ask the Minister to address two points in his winding up. First, what plans do the Government have to mandate the registration of ID at Companies House for all company directors? Secondly, the Bill focuses specifically on land registered with Her Majesty’s Land Registry. I would be grateful if the Minister commented on the quantity of as yet unregistered land that will fall within the scope of the Bill.
Alyn Smith (Stirling) (SNP)
We support the Bill and its aims, for which we have long since been calling, but we are highly frustrated that it has taken a tragedy in Ukraine to bring this legislation forward and shake the Government into action, when the problem of dirty money washing through the UK’s economy has been there for all to see for a long time now. The self-congratulatory tone of the Home Secretary’s statement did not hit the right mark, because a number of people across the House have been pressing for these measures for a long time, and the only thing the UK has really been leading on is being the destination of choice for the world’s dirty money. This is a problem to be fixed, and we will help in the fixing of it, but to my mind the self-congratulatory element of the Home Secretary’s presentation was not appropriate.
The Bill does not deal with a number of areas in which we would like to see more action. I appreciate that there is more to come, but let us move this forward. It does not deal with Companies House reform; although a White Paper is a welcome step forward, it does not go far enough, given that we know what needs to be done. The Bill does not deal properly with Crown dependencies and overseas territories. We believe there is a real risk of displacement—that as the rules change here, there will be movement into trusts in overseas territories—so this needs to be done as a comprehensive package. The Bill also does not deal with corporate liability reform, which is important, and nor does it do much for the UK’s anti-money-laundering regime, so we would like to see further action. Today’s Bill is a start, and we will engage with it positively to make it better, but we want to see an awful lot more. Scotland does not have the power to regulate this issue in Holyrood; this place has reserved those powers, so it is important that this is done properly.
We have engaged positively with the Bill to make it stronger. Our new clause 4 would give Companies House a greater role in anti-money-laundering efforts, which is overdue and necessary. We know what needs to be done, so let us get it done; let us get it started. New clause 4 would at least commence that work. I take the point that there are a lot of things to be done, but that is why we need to do them now, rather than wait. New clause 23 would ensure that beneficial ownership of Scottish limited partnerships was published. Again, that is long overdue—we have seen how land holdings in Scotland have been used to get dirty money out of various jurisdictions. Our amendment 41 would ensure that companies claiming to have no beneficial owner or person of significant control have to explain themselves better—also long overdue.
More generally, like other Members, I would be grateful for an assurance from the Minister that all these measures will be properly funded; if they are not, this Bill will not matter. We already have significant powers, such as unexplained wealth orders, which have not been properly funded or utilised and have not been the deterrent they should have been. If law enforcement bodies are taking a knife to a gunfight, as the right hon. Member for North Durham (Mr Jones) said, we need to make sure that they are properly resourced and tooled up to deal with the people they have to deal with. That said, we support the Bill and will engage with it constructively in Committee.
Mr John Baron (Basildon and Billericay) (Con)
It is an inconvenient truth that no matter how good the legislation, no matter how robust the rules and laws, they can be made ineffective if they are not properly enforced. To be properly enforced, they have to be properly funded, so although many of us on both sides of the House welcome the Bill and some of us, at least, think it should go further—we have tabled various amendments to that end—I suggest to the Government that, fundamentally, we need to look at the issue of funding. This Bill should be called the economic crime (transparency, enforcement and funding) Bill. I look forward to hearing from Ministers what importance the Government attach to this issue and, more important, what hard money will be put into reinforcing many of the new regulations and rules on transparency that are being introduced.
Various estimates, including those of Spotlight on Corruption, suggest that over the past five years, the number of prosecutions for money laundering has dropped by nearly a third; the National Crime Agency has obtained only five successful prosecutions a year, on average; and the number of individuals convicted by the Serious Fraud Office is on a downward trend. We speak strong words in this place, but what is happening on the frontline is that the people committing economic crime are winning, and winning big time. It is as simple as that. In an intervention, I suggested that the extent of economic crime in this country could be approaching £300 billion, yet we spend less than 0.1% of that figure—£850 million—on all the nationwide law enforcement agencies. That cannot be right.
Look at the comprehensive spending review over the next three-year period. The investment of £42 million in economic crime over that period set out in last autumn’s Budget represents just 0.1% of the £4.2 billion increase allocated to the Home Office. We should remember that the National Crime Agency has received a decrease in its core budget over the past five years, with the outgoing director general calling for a 54% increase in funding for that agency. We must ensure that our law enforcement agencies are properly funded, which is why I will be supporting—among a number of other amendments—new clause 2, which stands in the name of the right hon. Member for Barking (Dame Margaret Hodge). It is also why I tabled my more expansive new clause 24, which addresses the resources required not only to enforce the measures in this Bill, but to police economic crime more generally. In the long term, we could introduce measures that would let our law enforcement agencies take a share of the proceeds of successful prosecutions—why not? Some overseas agencies do. However, in the short term our agencies need to be properly funded in order to bring them up to speed and take these many criminals to task.
Putin thinks that the west is weak, and he thinks this country is weak when it comes to this issue. It is up to this House, on a cross-party basis, to prove him wrong, but to do that we need to fund our enforcement agencies properly. I look forward to hearing from the Minister how the Government are going to set about doing so—if not in this economic crime Bill, then perhaps in the one that I hope will come around the corner very soon.
Stephen Flynn (Aberdeen South) (SNP)
I have been listening closely to a lot of the contributions made by Members across the House. It is important to reflect on the fact that this Bill is an important piece of legislation, and one that is clearly long overdue. Will it have an impact on the situation as it stands—the invasion of Ukraine and the mindless slaughter of its people? I sincerely hope it will.
This is also a time for reflection, and for the Government in particular to reflect on how we have found ourselves in this situation. As my hon. Friend the Member for Stirling (Alyn Smith) said, this is not a time for self-congratulation. The issues dealt with in the Bill are not new: they have been spoken about for years upon years, because this Government have wilfully—I repeat: wilfully—presided over this city becoming a laundromat. They have been content to allow that to happen. Despite all the outrage from politicians, civic society and some financiers, not a single finger was lifted. We had the Russia report, the Intelligence and Security Committee report that has been mentioned at length and the promises from Prime Ministers now long gone past, and we had the Panama papers not that long ago—I think it was about four years ago—with 11.5 million documents highlighting corruption and how those with vested interests facilitate it, yet we still had absolutely nothing from this Government. This is not a time for self-congratulation; this is a time for head shaking, reflection and a promise to do better.
Does the Bill do better? Of course it does better than nothing, but will it be the panacea? Will it be the thing that delivers the change we all want to see? Like I said earlier, I sincerely hope that it does, but I am somewhat sceptical. My scepticism sits not just in the fact that this is the very same Government who have overseen much of this laundromat corruption within the City, but in the question of how we make the Bill function, which is raised by some of its details. The hon. Member for Basildon and Billericay (Mr Baron) rightly spoke about this in his remarks. There is nothing in the Bill on funding. Is the enforcement going to be clear? Will it happen swiftly? Will those involved seriously face the wrath of the law in good time and in time enough to have an impact on the situation as it stands at this moment?
There are some positives, such as the situation in relation to sanctions. Subsequent to the initial drafting of the Bill, the Government came forward with additional new clauses that outline how we will be able to sanction in timely collaboration with our partners elsewhere in the world, and we should be grateful for and positive about that step, which is to be encouraged, but that stands alone from a lot of the Bill. I still genuinely believe that individuals—in particular those who are linked to the Kremlin, who have hidden their money and who have stolen their money—will be using the time it has taken for this Government to put these measures in action to hide their money. Much of it will already be gone. That is why time is so crucial in all this. I sincerely urge the Minister to reflect on the fact that not only did his Government think it acceptable for 18 months to pass before people had to acquiesce to what the Government are seeking to do here, but they now think that six months is suitable. I simply ask: will six months help those in Ukraine?
Matt Hancock (West Suffolk) (Con)
I rise to support the Bill, and I am delighted to hear the full-throated support across the House for it. As the anti-corruption tsar in 2015-16, I had some role in putting together the policies that are finally making it on to the statute book now, in what I regard as the first half of an economic crime Bill. I pay tribute to the current anti-corruption tsar, my hon. Friend the Member for Weston-super-Mare (John Penrose), who has done a magnificent job of making progress since.
While I welcome many parts of the Bill, I focus in particular on sanctions, because the action taken on sanctions against Putin’s cronies by the UK so far is among the strongest in the world. We have designated £258 billion and more than 200 individuals, entities and subsidiaries, and 3 million companies are debarred from raising funds in the City of London. The Government and the Prime Minister deserve credit for their leadership, but I believe that measures can and should go further, whether tonight or in the second half of the legislation. For instance, I am attracted to amendments 26 and 27 and new clause 29, and I would love to hear from the Minister the Government’s attitude to those.
I also put on record the answer to the question of why we have to act legislatively at such pace. It is because the Sanctions and Anti-Money Laundering Act 2018 was riddled with holes by the other place during its passage. If we look back now at the speeches made in the other place then, some of those that looked unwise at the time look extremely unwise now. For instance, there was an explicit argument for more judicial review. On Report, the question was asked:
“Can the Minister explain why sanctions should be imposed on a person simply because they are connected to a specified country”?—[Official Report, House of Lords, 1 November 2017; Vol. 785, c. 1394.]
I think we have an answer to that question now. There was opposition to delegated powers, when Ministers need discretion to act quickly in relation to sanctions. Even the shadow Home Secretary, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), described those who act for oligarchs and then legislate for loopholes as “clever lawyers”. I hope that the other place listens to this debate and hears the strength of feeling. The same thing must not happen this time.
One further point—perhaps it is a point of detail—is that I am surprised to discover that some of those who spoke so powerfully for putting loopholes in place, and who made the case for confusion and delay in law, are also those who stand to benefit from confusion and delay in law, and they do not declare this conflict. Simply declaring earnings from the Bar is not good enough. Parliamentarians should make their interests crystal clear so that there is no confusion around them when they legislate in this area.
Finally, while we legislate rapidly in this case, we must also understand the cause of the challenges faced by Ministers trying to sanction Putin’s cronies. The cause is not the technology and how money is held, but the weakness in the law due to the 2018 Act and the flaws introduced to it during its passage. For instance, the shadow Home Secretary mentioned the challenges around cryptocurrency, but cryptocurrency is not a cause of avoiding sanctions. By contrast, by its nature and the nature of the technology, there is potential for more transparency in some of these new financial assets, so long as the legal framework is correct. Indeed, cryptocurrency exchanges can find out and follow the flow of the money more easily than can be done with traditional forms of finance, because of the nature of the technology, as the FBI has recently demonstrated with some excellent actions to crack down on economic crime in the United States. Let us put the right law in place and give Ministers the discretion they need to act fast. Let us get this legislation through fast, and then let us use it, because with shells raining down on innocent Ukrainians, there is not a moment to lose.
Jim Shannon (Strangford) (DUP)
I am pleased to be called to speak in this debate. As others have said, and as I recognise, none of us can be untouched by the images on our screens from the TV and media. Indeed, the image just last night of a mother and her two children lying lifeless on a pavement will remain with me and others for a long time to come. Those images stir up an anger within me that is difficult to manage. While this is a time for righteous anger—I am a great believer in that—I welcome this economic crime Bill today to take on Russia’s oligarchs and Putin at the same time. It is important that we do that.
It is clear that this Chamber is not the place for anger and knee-jerk reactions; it is the place for cool heads and measured useful action and for the message to be sent to Putin that the sanctions will be targeted, that this Bill will continue and that there is preparation for further action. Will the Minister give some idea of what is intended to come out of this and what will happen with the next stage, which will be even more necessary to support Ukraine and ensure that Russia is sanctioned?
Putin’s decision to invade Ukraine was based on—I say this with great respect—a USA reeling from covid and infighting. He looked to the same in the EU and perhaps in the United Kingdom. Tonight, we have an opportunity in this place to do our bit, and then the EU and the USA can do their bit and maybe a bit more. Will this legislation freeze the assets and ensure that moneys, bank accounts, houses, vehicles and boats can be seized and used to rebuild Ukraine?
Putin is very much wrong. What he has forgotten is that the British stand together in times of conflict. He has forgotten that the people of this great nation of the United Kingdom of Great Britain and Northern Ireland remember the sacrifices made by their grandparents in the wars and are prepared yet again to sacrifice comfort and more to prevent the spread of oppression. He has forgotten that our DNA rebels against injustice and that we refuse to turn a blind eye. He has forgotten that we pull together when needs be. He must remember that very shortly, before he receives a response that he has not anticipated. That is why the Bill and its measures on sanctions are so important.
The right hon. Member for West Suffolk (Matt Hancock) mentioned cryptocurrencies. I understand that it is difficult to follow them around the world and to know where they come from or where they go. Perhaps the Minister can tell us whether, rather than people trying to get out of it in some way, the trail and history of cryptocurrencies can be followed so that people can be held accountable.
My heart goes out to the Russian citizens who do not support the actions of the despot Putin, who sees young Russian soldiers as mere cannon fodder. As long as his oligarchs have the funds, he does not care that his people starve, which is why we must hit every oligarch with a British link, and hit them hard. That is also why the sanctions are not against the Russian people; they have to hit at the highest levels—at Putin and all those around him.
As the Secretary of State mentioned, it is important to have a two-pronged strategy. Tonight’s debate is about the Bill and about sanctions, but we also have to recognise the great work that has been done and the generosity of spirit across this great nation and across the religious divide in Northern Ireland. Hope for Youth NI has sent 20 40-foot lorries from Northern Ireland in the last week. My councillor colleague Janice MacArthur said that she has been overwhelmed by how far people are willing to go to meet the need.
We also have missionaries in situ in Ukraine, such as Mr and Mrs Sloan, who are feeding the Ukrainians. All those things are so important, and it is important that they can continue to do that. The fact that they have to do that is the reason we have the Bill before us tonight. Faith in Action Missions, based in Newtownards, has a church in Ukraine. Sadly, one of its workers was killed last week.
We in this Chamber recognise the need to have the legislation in place and to make it as hard-hitting as it can be to ensure that we can make changes. The words spoken in this Chamber are important to send a message to Putin, but actions are essential. We say that we stand with them but we need to show that alignment with Ukraine and across the world.
I ask the Government to hit Putin and his cronies where it hurts, make it hard for them and stop their ability to live a normal life. They should freeze their assets, take those assets off them and use the moneys to help to rebuild Ukraine—use Russian moneys to rebuild the land that they are destroying. I ask the Minister whether we can do that. If we cannot, that is the sort of legislation that I want to see. I want to see them hit where it hurts most—in their pocket—and probably somewhere else in their anatomy as well.
Nickie Aiken (Cities of London and Westminster) (Con)
I am sadly fully aware that my constituency holds potentially the largest matryoshka doll of Russian-owned investments in the UK. Dirty money is an issue with deep Kremlin-linked roots. As the Member of Parliament representing the Cities of London and Westminster, I support the Government’s objectives to cut the financial and professional arteries to the Kremlin.
Clearly, one of the biggest barriers to tackling money laundering has been the inability to track funds overseas. The Bill undoubtedly raises the bar for transparency globally and may also prove to be a watershed for global economic crime enforcement, given the increase in international collaboration between law enforcement agencies across the world. Broadly speaking, the register of overseas entities is most welcome but, like other hon. Members, I would like it to be implemented in a shorter timeframe. On that note, I welcome the amendments that will see the register updated annually and those that work to fortify our long-term defences against illicit finances.
Of course, I would like the Government to go as far as possible and even consider strengthening our compulsory purchase order laws to allow local authorities to sell long-term empty properties that do not comply with the proposed new register. Indeed, I am sure that council leaders in Surrey and central London would not argue if they were allowed to sell one or two £10 million-plus properties and invest the proceeds in building more affordable homes. Equally, we must ensure that buyers, conveyancing solicitors and estate agents play their part when involved in the sales of prime properties on the register.
Siobhan Baillie (Stroud) (Con)
I welcome the Bill and I share the desire to look carefully at the enforcement issues that have dogged previous legislation. As my hon. Friend represents such a multicultural constituency, does she agree that it is important for us to be careful about the anti-Russian message not being against all Russians and about comments about Russians being made to go home, because the law-abiding citizens who live here should be made welcome and continue to be so?
Nickie Aiken
I completely agree with my hon. Friend. We must remember that many Russians are living in this country because of Putin and because they have escaped his clutches.
To return to the register, I would welcome the Minister’s thoughts on whether it could be made law that, on day one of its coming into effect, nobody could sell a property that may be on it unless it had been registered. I am not talking about six months ahead, but from the day that the law comes into force. That could close the loophole of there being six months.
In a similar vein, strengthening the use of unexplained wealth orders will be a valuable tool in our arsenal. I have spoken to Charles Begley, the chief executive of the London Property Alliance, at length on that issue. Billions are settled in Westminster property alone. Most are under shell companies and very few are ever lived in. I have lost count of the number of times that I have knocked on doors when canvassing in Belgravia, Mayfair, Knightsbridge and other places to be met by housekeepers who tell me that sir or madam does not live there very often.
I am relieved to see that the Bill encompasses property and land, is tied together with reasonable retrospective clauses, and formally recognises complex ownership structures such as properties held in trust. All of that will create a potentially significant compliance burden for relevant entities, with breaches causing serious criminal liability. I hope that the Bill, soon to be an Act, will mean that Londongrad is finished and that the severity of the sanctions is the beginning of a new London.
Right now, oligarchs enjoy the grandest lifestyles that money can buy: they shop in Selfridges and on New Bond Street, they eat in the Michelin restaurants of Mayfair, they easily move money through shell companies, and their children benefit from being privately educated in the UK’s world-renowned public schools. No doubt this Bill, and the one that will follow, are the first step in cleaning up dirty money in our capital once and for all. I commend the Bill.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
We all know that a week can be a long time in politics but, amazingly, it is just 40 days since the resignation of Lord Agnew, who cited, among other things, that he thought the Government would not be willing to bring forward an economic crime Bill this year as his reason for walking out. That statement was of huge concern to many of us. The urgent question that we asked on that matter showed the coalition that exists on both sides of the House which wants real action to be taken on those issues.
Having listened to the Second Reading debate today, I think it is clear that the coalition has assembled again. It should not have taken Ukraine for the Bill to happen, but at least we have the first stage of the legislation. I counted 19 contributions from Back Benchers, all of whom agreed that the legislation should proceed. The Opposition also welcome the Bill and what it contains. There are things that we want to strengthen but we are clear that we will work with the Government to secure its passage today.
As was evident from the beginning of the debate, however, the Bill is not the totality of what is required. Other reforms, such as those to Companies House and to Scottish limited partnerships, must follow. The economic crime Bill promised in the next Queen’s Speech must be presented in the early part of the next Session and must make those reforms. I was in conversation with the Minister for much of last week. I welcome the assurances that have been given and that the Home Secretary gave from the Dispatch Box when she opened the debate.
The Bill covers three main areas: the register of overseas entities, the changes to unexplained wealth orders and the changes to the sanctions regime. I will cover all three. The main part of the Bill deals with the register of overseas entities, on which many hon. Members understandably focused. I very much agree with the hon. Member for Amber Valley (Nigel Mills) that that should be considered a mainstream part of a healthy transparent economy, and that it is not economic warfare to expect that level of transparency—to tell us for the first time who actually owns property in the UK and to make that information publicly available. I have long believed that transparency in this area is essential. Football clubs and luxury yachts get attention because they are visible. What I want to know is who owns the property in plain sight all around us, not just because of oligarchs and their position in the Putin regime, but because of the money launderers and the tax evaders. We have needed transparency in this area for years.
Sammy Wilson (East Antrim) (DUP)
Does the hon. Member accept that it is one thing to have a register and insist that people fill in the register and fill it in honestly, but it is another thing to ensure that that register is properly checked? Without the resources, skills and acumen to do that, this could become just another piece of legislation that people can bypass.
Jonathan Reynolds
I understand the right hon. Member’s scepticism, and he is of course right to acknowledge, as we have heard many times in this debate, that any measures are only as good as the enforcement mechanisms that exist and the resources behind them. What is significant about a register of property is that, if we do it properly, we can essentially prevent the sale of a property, because we can refuse to register the new ownership unless the measures have been followed. However, his argument about the wider reform required, certainly in relation to Companies House, is absolutely well made, and that is why the second piece of this legislation—the second Bill—is so essential.
Mr David Davis
The issue of the register is obviously important, but I do not think it answers all the questions that the Government assert it does, because we may want to refuse the re-registration of a sale, but on what basis will we do it? If the individual concerned—the oligarch or whatever—is already being sanctioned, we can of course do that, but if they are not being sanctioned and it is taking six months or a year to get to that point, we can do nothing about it.
Jonathan Reynolds
The right hon. Member pre-empts my comments about the timescale for implementation and the worries relating to that, and there have been some very interesting and valid speeches from all sides pointing out such dangers.
However, I want to address the fact—we have not actually heard about it in the debate today, such is the seriousness of the issues—that there is, and we should acknowledge this, an argument against the transparency that all of us are seeking. It is that there are some celebrities or people of high net worth who will cite concerns about privacy in relation to this measure. They would say that they are worried there will be potential risks to them from this register coming into effect.
Mr Kevan Jones
On transparency, and I raised this with the Home Secretary when she was here, there is the issue of Companies House. It was only because of Caroline Wheeler from The Sunday Times that we actually found out who the other shareholder is in Aquind, a company that has donated tens of thousands of pounds to individual Members of this House. That was because, strangely enough, the Luxembourg register is more open than ours. Does my hon. Friend think that, if Members wish to accept donations, this would be helpful to them, because at least they could then discover where the money actually came from originally?
Jonathan Reynolds
My right hon. Friend’s point about donations is absolutely well made. His earlier point was about how some of the things we are seeking to address with this legislation we know about because of whistleblowers and investigative journalists. It is only because of them that we have been able to get some sense of the scale of the problem, and that is what should worry us, because we have to decide, as British Members of Parliament, about the proportionality of the concerns about this. I would ask those people who have such concerns to understand that the lack of transparency in the UK, as things currently operate, does not just open us up to risks of criminal activity, but is now a threat to our national security.
Like many people, I once believed that, as countries developed and became wealthier, that created an irresistible pressure for political reforms—for strong institutions, independent courts and the rule of law—but the fact is that that has not happened in many parts of the world. We are all too familiar with stories of people who have looted the national wealth of their countries, and then stashed those assets safely here in the west. There are examples from Nigeria, Kenya, Indonesia, China, Afghanistan, Russia and many others, and I would like to thank Transparency International for its campaigning and advocacy on these matters. Ukraine itself was once a major victim of this under the corrupt presidency of Viktor Yanukovych. Such corruption often leaves behind countries that are poor and dysfunctional, where the state is starved of the resources and legitimacy it needs to function properly, and where millions are denied the path to prosperity that they deserve. In that space, extremism and terrorism can thrive, so we simply cannot allow this to go on.
Tackling this properly clearly requires international co-operation, but when it comes to registers of beneficial ownership, that co-operation does now exist. That is why there is clear consensus on this happening in relation to property in the UK. This debate has shown that the principal difference of view between ourselves and the Government, which we will obviously discuss in Committee, is what length of time is reasonable to give people to register the beneficial ownership of the near 100,000 properties that will be affected. I think people know that we want 28 days. The Government originally proposed 18 months, and I do acknowledge that they have moved some way in reducing that to six months. I also acknowledge that this is a significant change for some people in relation to their property rights.
However, I would say that this change was announced in 2016 by David Cameron. The pre-legislative scrutiny took place in 2018, and my right hon. Friend the Member for Barking (Dame Margaret Hodge) outlined some of the history of that. So this change has been a long time coming, and people have known it was coming. It is not really the 28-day implementation period we are seeking, but the six years and 28 days that that adds up to. That is why I believe it is reasonable, proportionate and necessary to ask the Government to act at speed.
The second part of the Bill proposes changes to unexplained wealth orders. I raised the problems with these orders when we had the urgent question. I am pleased to see them included as part of this Bill, and I again acknowledge that the Government have already accepted several Labour amendments on this matter. The problems with these orders relate to issues with implementation that have occurred in the courts, so it is clearly good to see those addressed. However, many Members went further in their speeches because there are concerns, because of the way that Russia operated in the 1990s, that it can be hard to use unexplained wealth orders to take the action required now. Several Members have proposed a new set of powers that could freeze relevant assets while cases are made, and again we can deal with those amendments in Committee, but I am sympathetic to the arguments put forward.
The third part of the Bill relates to sanctions and their application. People are asking us as Members of Parliament why those who have been subject to sanction by the US and the EU are not currently sanctioned by the UK. The debate today recognises that the regime laid out in the Sanctions and Anti-Money Laundering Act 2018 is not sufficient. There is clearly a widespread desire to see this improved, and proposals in this area are welcome. However, I would also say, separate to this, that there are the issues of resources and enforcement. My right hon. Friend the Member for North Durham (Mr Jones) and the hon. Member for Basildon and Billericay (Mr Baron) made that point in detail. My understanding is that, as a country, we are under-powered in the resources and capacity we devote to this. Just last month, the former Leader of the House—now the Minister for Brexit Opportunities and Government Efficiency —said he wanted to cut 65,000 civil servants over the next three years. However, this is a clear example of an area where we need more capacity, as well as the right legal regime, to do what is required. The seriousness of these matters means that the Government must devote the resources required to do that.
Mr Baron
Very briefly, we are going to see a second economic crime Bill come through, and I think it would do the House a great service if the Labour party actually put forward concrete proposals when it comes to funding that would perhaps gather more support across the House than the hon. Member imagines. At the moment, the Opposition are just talking in very vague terms, but everybody seems agreed, so we need to see some concrete action.
Jonathan Reynolds
I am always happy to be of service to the hon. Gentleman, and we will be looking to do that. He will of course know that a comprehensive spending review is imminent.
Jonathan Reynolds
I feel I must proceed so we can go into Committee, given how important this is.
To conclude, the measures in this Bill are necessary. They are overdue, but I am pleased that they will make progress today. There is much more to do, but I hope that this legislation will mark a turning point in the UK no longer being known as a destination of choice for hiding ill-gotten gains. The measures will have an effect, and it is possible some people will argue that they will limit foreign investment in the UK. I would say that any money stopped by this Bill is money we should never have been open to in the first place. As the journalist Edward Lucas wrote a decade ago in his book “The New Cold War”:
“If you believe…money matters more than freedom, you are doomed when people who don’t believe in freedom attack using money.”
Too many parts of this country have been compromised by their proximity to the extreme wealth and influence the oligarchs can wield. The perception that the UK has been willing to turn a blind eye to this has been of considerable detriment to our reputation and legitimacy. If this Bill marks the moment when that starts to change, it will be very welcome indeed.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) and I thank him for his engagement over the last week, because it is important that, despite any differences in terms of finessing this Bill, we are all in agreement, as I think we are, and it is very important that this Parliament and this House are united in our drive to right the wrongs done to the people of Ukraine and to drive Russian money out of London and indeed to punish the oligarchs. I shall cover as many of the points raised by hon. Members as I can in the time available, but first I want to remind the House about what the Bill signifies and what we are hoping to achieve and believe it will achieve.
The Bill will improve transparency about the ownership of companies and property in the UK and strengthen the enforcement of financial sanctions. It will create a register of overseas entities to crack down on foreign criminals using UK property to launder money. The new register will require anonymous foreign owners to reveal their real identity to ensure criminals cannot hold property behind secretive chains of shell companies. By legislating now, we will send a clear warning to those who have used, or are thinking of using, the UK property market to launder ill-gotten gains, particularly those linked to the Russian Government.
Mr Baron
The Minister is absolutely right and this Bill is of course welcome, although many of us believe it should go further. However, putting that to one side for the moment, do he and his Front-Bench colleagues accept that all these well-intended regulations and rules will come to nothing if not enforced properly? When will the Government bring forward concrete figures on the proper increase in funding required to make sure that these rules and regulations, and others, have full effect?
Paul Scully
I will come to those figures because I totally agree with my hon. Friend that the rules and new laws must be enforced. We can talk as much as we like, but this is about action, and we are leading the way on action.
This Bill will also reform unexplained wealth orders by removing the key barriers to their use by law enforcement and include amendments to financial sanctions legislation, helping to deter and prevent breaches of sanctions.
Questions have been raised today about why it has taken this long to come up with the legislation. We had prelegislative scrutiny on the register of ownership a couple of years ago, which obviously was interrupted by the pressures of covid on parliamentary time. None the less, that means we have been able to adapt the paragraphs that have already been drafted, undergone prelegislative scrutiny and had a clean bill of health from Committees in this place to the new norm following the Russian invasion of Ukraine.
Dame Angela Eagle
We on the Treasury Committee have just published a report on economic crime and some of the evidence we took highlighted a great deal of frustration among those working in this area and trying to make the system work, in particular at the Minister’s Department’s lack of progress with reform of Companies House. That is in the Minister’s own specific bivouac; why has more not been done faster?
Paul Scully
I am thinking of the word bailiwick rather than bivouac, but I hope the hon. Lady will agree that our being able to reflect on that legislation and align it with the broader reforms of Companies House that we have subsequently announced has enabled the broader legislation to work together and be more effective. That has been absolutely essential in ensuring that the new requirements are workable and proportionate and the register strikes the right balance between improving transparency and minimising burdens on legitimate commercial activity.
Peter Dowd
On Second Reading of the Sanctions and Anti-Money Laundering Act 2018, the Prime Minister, who was then Foreign Secretary, said:
“The aim of the Bill is to grant Her Majesty’s Government full power over British sanctions policy after we leave the EU and, in a memorable phrase, to take back control.”—[Official Report, 20 February 2018; Vol. 636, c. 77.]
Does the Minister think we have used the full power in the fullest way to take sanctions against those we think are a threat to us in economic terms?
Paul Scully
I thank the hon. Gentleman for raising that because the now shadow Chancellor boasted afterwards how she managed to weaken the Government’s approach during the passage of that Bill. I believe we have gone as far as we can, but we need more measures, which is what today is all about. This is the first half of those measures to make sure we can introduce the remaining economic crime Bill, which includes Companies House reform.
We have tabled an amendment to reduce the transition period from 18 months to six months, but I will outline a little further how we can make this work effectively to ensure that people cannot just move money out of this country.
Matt Hancock
Will the Minister welcome the conversion of the Labour party to supporting strengthening the sanctions regime, because a strong Bill was introduced in this House by the then Foreign Secretary, but it was watered down in the House of Lords with the support of the Labour party? I do not like to make party political points out of this because we should be united on it, but that is a matter of fact.
Paul Scully
I agree that it is, but let us come back to a sense of unity. We have had some ding-dongs throughout, but it is time now to make sure we can come together and send the most powerful message as a House and Chamber to the oligarchs that their behaviour will not be tolerated for a moment longer.
It is also important to remember that the majority of property held by overseas entities will be owned by entirely law-abiding businesses and people. We are talking about 95,000 properties in England and Wales owned by 30,000 or so overseas entities. Only a tiny fraction of them are likely to be held by criminal or corrupt interests. The transition period is an important protection of the rights of those legitimate owners of property. The Government do not interfere with individuals’ rights lightly and the interference could not reasonably have been expected when rights over the properties within scope of the register were acquired, so we must ensure that we respect those rights in a way that cannot be challenged. No doubt those who wish to avoid these requirements and who are able to afford expensive legal teams will take any advantage of opportunities to do so.
Kevin Hollinrake
The transition period—the debate on the timescale of 18 months, six months or 28 days—is key. Does the Minister agree that the most effective way of dealing with this and preventing the asset flight we are all concerned about is through something along the lines of manuscript amendment 64, which would require people who want to sell or transfer their asset to disclose the beneficial owner prior to doing so to Companies House and therefore Her Majesty’s Land Registry could block it? Will he accept that that is the right way forward?
Paul Scully
He will, and I thank my hon. Friend for his work and for raising that. I will come back to his point shortly.
There will also be law-abiding British companies that have adopted such structures and that type of ownership for legitimate commercial reasons, including real estate investment trusts, which are public companies, whose core business is to manage and own properties that generate income, and in particular pension schemes holding land and properties. Others will be British nationals who have adopted the arrangements for legitimate reasons of privacy—as we have heard, perhaps celebrities who do not want their address to be known publicly. They may wish to apply to Companies House for their personal details to be protected from public view on the new register, but the threshold for exemption from the public register will be high, so it is right for individuals to have time to seek advice on their options and how to make a case to the registrar.
Several hon. Members rose—
Paul Scully
Before giving way further, I want to acknowledge that I am very aware of the strength of feeling that corrupt people must not be allowed to set up ways to escape the transparency this register will bring. I can therefore see merit in requiring all who are selling property to submit a declaration of their details at the point of the transfer of land title during that transition period. That would mean we would give anyone selling a zero-day transition period; that goes further than the 28 days, but it is an acknowledgement of the work done across this Chamber, in particular with the help of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). They would have to register ownership if selling, and in that way we would either get their ownership details, or if they did not sell, we would get it at the end of the transition period in a way that still protects legitimate owners. We will give this further consideration ahead of finalising the Bill in the Lords next week, because it is not right for British businesses to bear the brunt of Her Majesty’s Government’s pursuit of the Russian cronies.
Dame Margaret Hodge
I am interested in where the Minister has got his information from, because I have not seen that data. I understand about the Hollywood stars and those people who do not want their ownership of property to be revealed, but my understanding from both Transparency International and Global Witness is that most properties are bought through shell companies—often located in the British Virgin Islands—probably as a mechanism for laundering money. I wonder where he gets his data. Some of the British companies that choose that structure do so to avoid stamp duty, and the House does not want to endorse that, either, does it?
Paul Scully
No, indeed. If the right hon. Lady looks at the Panama papers, I think she will see that they cite Emma Watson as having bought a house under a shell company owing to security risks, and the Pandora papers cite a former Prime Minister of this country buying a house in Harcourt Street and ultimately saving £300,000 in stamp duty. We clearly should not support that. So we have to get the balance right. There will be legitimate reasons, and there will be people avoiding tax, which we want to stamp out, but, in repurposing these measures, we want first to ensure that we are stamping out oligarchs’ money.
Layla Moran
The Minister will be aware of amendment 4—we will discuss it in Committee—which asks why there is an exemption on the so-called economic wellbeing of the UK. He will be well aware that many of these oligarchs own big companies that employ thousands of people, so the exemption could be used as a loophole. Will he accept the amendment? If not, will he explain why the loophole is there in the first place? We are very confused.
Paul Scully
I will happily talk about that amendment in Committee. However, I take the hon. Member’s point and the spirit in which she makes it. Perhaps we can debate that later, because I totally get what she is saying.
In respect of Russia specifically, we have swiftly implemented the strongest set of economic sanctions ever imposed against a G20 country, including the recent sanctioning of Kremlin associates Alisher Usmanov and Igor Shuvalov. That is worth a combined $19 billion with immediate effect. The Government’s new amendments will also streamline current legislation so that we can respond even more quickly.
We had discussion about funding and resource. The Government have developed a sustainable funding model, including about £400 million over the spending review period. We have announced new investment of £18 million in the next financial year and £12 million in the years after that for economic crime reforms, in addition to £63 million over the spending review period for the Companies House reforms. Since 2006-07, just under £1.2 billion of the assets recovered under the Proceeds of Crime Act 2002 have been returned to law enforcement agencies.
Gavin Robinson
I am grateful to the Minister. He will know—I raised this with him earlier—that there was confusion in Northern Ireland about whether, without a legislative consent motion, some of the Bill would not apply to Northern Ireland, creating another loophole that would allow oligarchs to retain assets in the United Kingdom through the back door. Will he confirm that, through the transition period, and knowing that the majority of the Bill does extend to Northern Ireland, he will ensure that there are no loopholes or back doors?
Paul Scully
Yes, the Bill does contain provisions relating to the register of overseas entities and unexplained wealth orders that engage devolution powers in both Scotland and Northern Ireland. The Government are engaging closely with colleagues across all three devolved Administrations, who are all supportive of the Bill’s measures, and we continue to work closely with Scotland and Northern Ireland to complete those respective legislative processes at the earliest opportunity.
We clearly want to ensure that we have that Companies House reform, which will be the biggest since its inception 200 years ago. It is a complex area of law, and we will return to it at the earliest possible time. I thank right hon. and hon. Members for their contributions to this excellent and informative debate. I look forward to discussing the Bill in Committee.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Further proceedings on the Bill stood postponed (Order, this day).
Economic Crime (Transparency and Enforcement) Bill (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a),
That, for the purposes of any Act resulting from the Economic Crime (Transparency and Enforcement) Bill, it is expedient to authorise:
(1) the payment out of money provided by Parliament of any expenditure incurred under or by virtue of the Act by a Minister of the Crown or a government department; and
(2) the payment of sums into the Consolidated Fund.—(Amanda Solloway.)
Question agreed to.
Economic Crime (Transparency and Enforcement) Bill
Monday 7th March 2022
(2 years, 8 months ago)
Commons ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 7 March 2022 - (7 Mar 2022)
21:38 - The Committee divided: - Ayes: 229 / Noes: 303 - Question accordingly negatived.
21:54 - The Committee divided: - Ayes: 225 / Noes: 306 - Question accordingly negatived.
22:08 - The Committee having divided: - Ayes: 234 / Noes: 300 - Question accordingly negatived.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
The selection paper includes three manuscript amendments that the Chairman of Ways and Means has selected: amendment 63, in the name of David Linden; new clause 41, in the name of the Secretary of State; and amendment 64, in the name of Kevin Hollinrake. A separate paper containing those amendments is available from the Vote Office.
Clause 1
Overview
Question proposed, That the clause stand part of the Bill.
The First Deputy Chairman
With this it will be convenient to discuss the following:
Clauses 2 and 3 stand part.
Amendment 24, in clause 4, page 2, line 18, at end insert—
“(aa) a statement either—
(i) of the names of any persons who are registered beneficial owners of the entity and are designated persons listed on the UK Sanctions List, or
(ii) that no registered beneficial owners of the entity are so listed;”
This amendment would require the identity of any sanctioned registered beneficial owners of the entity, or a statement that there are no such persons, to be included in an application for registration.
Clauses 4 to 6 stand part.
Amendment 5, in clause 7, page 4, line 11, after “update period” insert “or trigger event”.
This amendment would extend the duty to update the registrar to certain trigger events.
Amendment 25, page 4, line 11, at end insert—
“(aa) an updated statement in accordance with section 4(1)(aa)”.
This amendment requires statements made under amendment 24 to be updated annually.
Amendment 6, page 5, line 18, at end insert—
“(8A) For the purposes of this section, trigger event means the date on which an overseas entity has reasonable cause to believe that anyone has become or ceased to become a registrable beneficial owner.”
This amendment defines a trigger event.
Clause 7 stand part.
Amendment 42, in clause 8, page 5, leave out lines 30 to 35 and insert—
“(a) on the first day of contravention, a fine,
(b) on the second continued day of contravention, an additional fine of £500, and
(c) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.
(2A) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”
The purpose of this amendment is to provide progressively higher fines for a registered overseas entity, and every officer of the entity, for an initial default in complying with its duty to update the register, leading to a seizure of assets if non-compliance continues for 6 months.
Government amendment 45.
Amendment 7, page 5, line 31, leave out “£500 and one-tenth of level 4 on the standard scale” and insert
“£2,500 and half of level 4 on the standard scale.”
This amendment would increase the daily default fine for an offence committed under section 8 in England or Wales.
Government amendment 46.
Amendment 8, page 5, line 35, leave out “one-tenth” and insert “half”.
This amendment would increase the daily default fine for an offence committed under section 8 in Scotland or Northern Ireland.
Amendment 43, page 6, leave out lines 1 to 6 and insert—
“(a) on the first day of continued contravention, a fine of £500, and
(b) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.
(6) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”
The purpose of this amendment is to provide progressively higher fines for every officer of the entity for a continuing contravention of its duty to update the register, leading to a seizure of assets if non-compliance continues for 6 months.
Government amendments 47 and 48.
Clause 8 stand part.
Amendment 9, in clause 9, page 7, line 14, leave out subsection (8).
This amendment would extend the definition of an overseas entity registered as the proprietor of a relevant interest in land for the purposes of sections 9 and 10 to include such entities irrespective of date of registration of the entity.
Clauses 9 to 11 stand part.
Amendment 41, in clause 12, page 8, line 32, at end insert—
“(3A) If an entity declares that there is no person whom it knows, or has reason to believe, is a registrable beneficial owner in relation to that entity, the registrar of companies in England and Wales must give an information notice under this section to that entity requiring full details of how the entity is controlled.”
This amendment requires an explanation to be given where an entity claims there is no registrable beneficial owner. Making a false statement in purported compliance, or failing to comply, with a notice under this section is an offence under section 15.
Clause 12 stand part.
Clauses 13 to 15 stand part.
Amendment 10, in clause 16, page 10, line 29, at end insert—
“and (d) prior to the registrar taking action under section 5(1).”
This amendment establishes that such verification processes made under regulations should take place prior to the registrar recording the date of registration in the register, allocating an overseas entity ID to the entity and record the overseas entity ID in the register.
Amendment 11, page 10, line 30, leave out “may” and insert “must”.
This amendment requires the Secretary of State to include the specified information in regulations.
Government amendment 49.
Amendment 12, page 10, line 35, at end insert—
“(4) The Secretary of State must make regulations under this section no later than 28 days following the commencement of Part 1 of this Act”.
This amendment would require the Secretary of State to make regulations under this section within 28 days of the commencement date.
Clauses 16 and 17 stand part.
Amendment 4, in clause 18, page 11, line 16, leave out subsection (1)(b).
This amendment removes the ability of the Secretary of State to exempt an individual from the requirements to register their overseas entities on the grounds of the economic wellbeing of the United Kingdom.
Clauses 18 to 20 stand part.
Amendment 37, in clause 21, page 13, line 1, leave out from beginning to end of line 2 and insert—
“(3) No cause of action in civil proceedings shall lie against a person in respect of the making of a protected disclosure as defined in section 1 of the Public Interest Disclosure Act 1998 in relation to information from the register.
(3A) In a prosecution of a person for any offence prohibiting or restricting the disclosure of information it is a defence for that person to show that, at the time of the alleged offence, the disclosure was, or was reasonably believed by the person to be, a protected disclosure.”
Clause 21 stand part.
Clauses 22 to 25 stand part.
Amendment 44, in clause 26, page 16, leave out lines 10 to 15 and insert—
“(a) on the first day of contravention, a fine,
(b) on the second continued day of contravention, an additional fine of £500, and
(c) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.
(2A) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”
The purpose of this amendment is to provide progressively higher fines for a registered overseas entity, and every officer of the entity, for providing inconsistent information for the register, leading to a seizure of assets if non-compliance continues for 6 months.
Government amendments 50 and 51.
Clause 26 stand part.
Clauses 27 to 30 stand part.
Amendment 26, in clause 31, page 18, line 13, leave out “knowingly or recklessly”.
This amendment removes the requirement that a false statement to the registrar needs to be proven to have been given knowingly or recklessly for that statement to constitute an offence.
Amendment 27, page 18, line 18, at end insert—
“(1A) If the registrar has reason to believe that a person may have committed an offence under section 31 the registrar may require—
(a) any person connected with the entity, including in any professional or advisory capacity,
(b) any public body, or
(c) any other person
to provide information in connection with that potential offence.
(1B) A requirement under subsection (1A) applies notwithstanding the data protection legislation (within the meaning in section 25).
(1C) A person who fails to comply with a requirement under subsection (1A) commits an offence.”
This amendment gives the registrar powers to demand information in connection with suspected false statement offences.
Clause 31 stand part.
Clauses 32 and 33 stand part.
Amendment 34, in clause 34, page 20, line 20, at end insert—
“, provided that the person can show that he or she was not acting knowingly, recklessly or carefully.”
This amendment would require those giving advice in a professional capacity to show that they were not acting knowingly, recklessly or carelessly if they are not to be caught by the provisions of subsection (2).
Clause 34 stand part.
Clauses 35 to 37 stand part.
Amendment 29, in clause 38, page 21, line 4, leave out from “if” to “the” in line 5 and insert
“it is reasonable to assume that, on the balance of probabilities,”.
This amendment reflects the civil law standard of proof.
Amendment 30, page 21, line 6, at end insert—
“, or conduct which would have been an offence if the word ‘recklessly’ in clause 15(2)(b) were replaced with ‘carelessly’”.
This amendment expands the test to behaviour which may reflect a lack of due diligence as well as deliberate intent.
Amendment 31, page 21, line 6, at end insert—
“(1A) Where the failure relates to the ownership of a qualifying estate (as defined in Schedule 4A to the Land Registration Act 2002), any penalty imposed by the registrar shall be calculated by reference to the market value of that qualifying estate.”
This amendment makes provision for the calculation of penalties by reference to the market value of the qualifying estate.
Amendment 32, page 21, line 9, at end insert—
“(ba) for penalties to be reduced in cases where a person was acting carelessly, and not recklessly or knowingly;”.
Manuscript amendment 63, page 21, line 12, insert—
“(f) disqualifying the person from the electoral roll.”
Amendment 33, page 21, line 20, leave out subsection (4) and insert—
“(4) The regulations must provide that—
(a) if a person is convicted of an offence and is liable to a fine, and is subsequently the subject of a financial penalty under this clause relating to that same conduct, the penalty shall be reduced by the amount of the fine (but not below zero), and
(b) if a person is subject to a financial penalty under this clause, and is subsequently convicted of an offence relating to that same conduct, any fine for which they are found liable shall be reduced by the amount of the financial penalty (but not below zero).”
Clause 38 stand part.
Clauses 39 to 49 stand part.
Amendment 38, in clause 50, page 32, line 9, at end add—
‘(2) The Secretary of State shall establish an inquiry into the use of legal intimidation and strategic lawsuits against public participation (SLAPPs) to prevent such actions from being used to prevent economic crime from being uncovered.”
Clause 50 stand part.
Government amendment 59.
Clauses 51 to 52 stand part.
Government amendments 52 to 54.
Clause 53 stand part.
Amendment 1, in clause 54, page 33, line 7, after “force”, leave out “on such day as” and insert
“at the end of six months from the day on which this Act is passed or on any earlier day that”.
The intention of this amendment is for the Parts 1 and 2 of the Act to come into force no later than 6 months from being passed.
Government amendments 60 to 62.
Amendment 36, page 33, line 20, at end insert—
“(8) The provisions of this Act shall have retrospective effect from the date that the Bill received first reading in the House of Commons.”
This amendment seeks to move forward the provisions of this Bill, backdating them to the day upon which it received first reading.
Clause 54 stand part.
Amendment 2, in clause 55, page 33, line 22, leave out “Economic Crime (Transparency and Enforcement)” and insert “Registration of Overseas Entities, etc”.
The intention of this amendment is for the short title to reflect more accurately the contents of the bill.
Clause 55 stand part.
Government new clauses 31 to 40.
Government manuscript new clause 41.
New clause 2—Report on funding of enforcement agencies—
‘Within 28 days of this Act being passed, the Secretary of State must publish and lay before Parliament a report on the funding of enforcement agencies in connection with the provisions of Part 2 of this Act.’
This new clause would require the Secretary of State to publish and lay before Parliament a report on the funding of enforcement agencies in connection with the reforms to unexplained wealth orders, as provided for in Part 2 of the Bill.
New clause 3—Requirement on entity to register if it owns certain assets—
‘(1) An overseas entity must apply for registration in the register of overseas entities if the entity is registered as the owner of—
(a) a professional football club,
(b) a jet, or
(c) a yacht.
(2) In this section—
“professional football club” means any association football club playing in the English Premier League, the English Football League or the Scottish Professional Football League.
“jet” means any jet aircraft with a value over £500,000.
“yacht” means any medium sized sailing boat with a value over £500,000.’
This new clause would require an overseas entity that owns a football club, jet or yacht to apply for registration in the register of overseas entities.
New clause 4—Registrar of companies for England and Wales: additional duties—
‘(1) The Secretary of State must amend the Money Laundering, Terrorist Financing and Transfer of Funds Regulations (2017/692) to specify that the registrar of companies for England and Wales is a supervisory body in relation to overseas entities as defined in section 2 of this Act.
(2) The Secretary of State must direct the registrar of companies for England and Wales to participate in a government identity assurance scheme.’
The purpose of this new clause is for Companies House to be made an anti-money laundering supervisor and to register as part of the UK Government’s Verify scheme.
New clause 5—Duty to report on representations received by the Government relating to economic crimes—
‘(1) Within 1 month of this Act being passed, the Secretary of State must lay before Parliament a disclosure report detailing all representations received by the Government in the last twelve months regarding the register of overseas entities, as provided for by Part 1 of this Act.
(2) The disclosure report under subsection (1) must include—
(a) the minutes from or any notes of meetings in which such representations were made; and
(b) all correspondence, including submissions and electronic communications, addressed or copied to any Minister or former Minister of the Crown.
(3) Information provided under subsection (2)(b) must include—
(a) the names of entities making representations;
(b) the dates on which representations were made; and
(c) a summary of what the representation was.’
This new clause requires the Government to lay before Parliament a report containing details of all representations made by entities including businesses, regarding the register of overseas entities, provided for by Part 1 of the Bill. The report must be laid within 1 month of the Bill attaining Royal Assent.
New clause 6—Transitional Period for Certain Qualifying Estates—
‘(1) A transitional period of 18 months shall apply to—
(a) an entity that—
(i) is registered in the register of title kept under the Land Registration Act 2002 as the proprietor of a qualifying estate within the meaning of Schedule 4A to that Act, and
(ii) became so registered in pursuance of an application made on or after 1 January 1999,
(b) an entity that—
(i) in relation to a plot of land that is registered in the Land Register of Scotland, is (or is to be) entered as proprietor in the proprietorship section of the title sheet for the plot of land by virtue of an application for registration made on or after 8 December 2014,
(ii) in relation to a lease that was recorded in the General Register of Sasines or registered in the Land Register of Scotland before that date is, by virtue of an assignation of the lease registered in the Land Register of Scotland on or after that date, the tenant under the lease, or
(iii) in relation to a lease that was registered in the Land Register of Scotland on or after that date, is the tenant under the lease, or
(c) an entity that—
(i) is registered in the register kept under the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) as the owner of a qualifying estate within the meaning of Schedule 8A to that Act, and
(ii) became so registered on or after the day on which that Schedule came into force.
(2) Overseas entities registered as the proprietor of relevant interests in land falling within the scope of subsection (1) must comply fully with all obligations under the Act at the end of the period of 18 months beginning with the commencement date.’
This new clause creates a transition period for certain overseas entities registered as the proprietor of relevant interests in land in order to provide the Government with a time frame to resolve issues with the Land Registry that currently make registration impracticable.
New clause 7—38A Further reforms to Companies House—
‘(1) Not later than 28 days from when Part 1 of this Act comes into force, the Secretary of State must publish draft legislation for the purpose of making further reforms to Companies House, including to support the effective functioning of the register of overseas entities.
(2) The draft legislation must include—
(a) new powers for the registrar to aid the verification of foreign entities applying for registration as set out in section 4 of this Act;
(b) new powers for the registrar to better share data with enforcement agencies; and
(c) reforms that will improve the quality and veracity of the information on the register.’
This new clause would compel the Secretary of State to publish draft legislation on reforms to Companies House, including reforms that would support the operation of the Act.
New clause 8—47A Annual reports on unexplained wealth orders—
‘(1) The Secretary of State must prepare annual reports on unexplained wealth orders made by the High Court on application by an enforcement authority under the Proceeds of Crime Act 2002.
(2) An annual report must —
(a) specify the number of unexplained wealth orders made during the relevant period; and
(b) specify the number of applications by each enforcement authorities during the relevant period.
(3) An annual report must be published and laid before Parliament before the end of the 4 month period beginning immediately after the last day of the period to which the report relates.’
This new clause requires the Secretary of State to make an annual report on the use of unexplained wealth orders.
New clause 9—Review of Act 2022 and adequacy of resources
‘(1) The Secretary of State must publish a review of the operation of this Act by 31 December 2022.
(2) The registrar of companies in England and Wales must publish a report on the operation of this Act by 31 December 2022.
(3) The report by the Secretary of State under subsection (1) must include an assessment of the adequacy of resources allocated for the operations of the registrar of companies in England and Wales, as augmented under this Act.
(4) The report by the Secretary of State under registrar of companies in England and Wales must include an assessment of what the effect on performance of the over the following 12-month period if the real-terms resources after inflation allocated by the Secretary State were increased by—
(a) 10%,
(b) 25% and
(c) 50%.
(5) The Secretary of State must publish a further review of the operation of this Act by 31 December 2023, and at least once in each subsequent calendar year.
(6) The registrar of companies in England and Wales must publish a further report of the operation of this Act by 31 December 2023, and at least once in each subsequent calendar year.’
This new clause would require annual reports from the Government and Companies House on the effectiveness of this Act, and the adequacy of resources allocated to Companies House.
New clause 10—Review of sanctions regulations: requirement for a debate in House of Commons—
‘In section 30 of the Sanctions and Anti-Money Laundering Act 2018 (Review by appropriate minister of regulations under section 1), after subsection (5), insert—
“(5A) An appropriate Minister of the Crown must, not later than ten sitting days after a report under this section has been laid before Parliament, make a motion in the House of Commons providing for a debate in relation to the report.”’
This new clause would require the Government to schedule a debate on reports laid before the House in relation to the continued appropriateness of regulations made under section 1 of the Anti-Money Laundering Act 2018.
New clause 13—Power to require overseas entity to register if it owns property within a freeport—
‘(1) The Secretary of State may by notice require an overseas entity to apply for registration in the register of overseas entities within the period of 6 months beginning with the date of the notice if at the time the notice is given—
(a) the entity is registered as the proprietor of a relevant interest in property within a UK freeport, and
(b) the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.
(2) A notice under subsection (1) lapses if, before the end of the period mentioned there, the overseas entity—
(a) ceases to be registered as the proprietor of a relevant interest in property within a freeport, or
(b) becomes an exempt overseas entity.
(3) If an overseas entity fails to comply with a notice under subsection (1), an offence is committed by—
(a) the entity, and
(b) every officer of the entity who is in default.
(4) A person guilty of an offence under subsection (3) is liable—
(a) on summary conviction in England and Wales, to imprisonment for the maximum summary term for either-way offences or a fine (or both);
(b) on summary conviction in Scotland, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both);
(c) on summary conviction in Northern Ireland, to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum (or both);
(d) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both).
(5) In subsection (4)(a) “the maximum summary term for either-way offences” means—
(a) in relation to an offence committed before the time when paragraph 24(2) of Schedule 22 to the Sentencing Act 2020 comes into force, 6 months;
(b) in relation to an offence committed after that time, 12 months.
(6) In this section “exempt overseas entity” means an overseas entity of such description as may be specified in regulations made by the Secretary of State for the purposes of this section.
(7) Regulations under subsection (6) are subject to the affirmative resolution procedure.’
This new clause requires an overseas entity to apply for registration in the register of overseas entities if they have a property within a freeport.
New clause 14—Commission for the Protection of Whistleblowers—
‘The Secretary of State shall establish a Commission for the Protection of Whistleblowers for the purpose of enhancing the transparency and enforcement of economic crime covered by this Act.’
New clause 18—Publication of information during transitional period—
‘(1) The Secretary of State must record the activities of overseas entities that fall within the scope of this Bill which take place during the transitional period, provided for by part 2 of schedule 3 and part 2 of schedule 4.
(2) The Secretary of State must publish on a weekly basis the information gathered under paragraph (1).
(3) “Information” under subsection (2) means details on overseas entities as provided for by Part 1 of this Act.’
This new clause would require the Secretary of State to record and publish the details of companies benefitting from the 18-month transitional period, to facilitate scrutiny as to whether they may be linked with the Russian regime.
New clause 19—Power to require registration of donations to registered political party, etc.—
‘(1) The Secretary of State must by notice require a company or Limited Liability Partnership (LLP) to apply for registration in the register of overseas entities within the period of 6 months beginning with the date of the notice if at the time the notice is given—
(a) the company or LLP has made a donation to—the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.
(i) a registered political party,
(ii) a candidate at an election,
(iii) a third party (non-party campaigner under Schedule 11 of the Political Parties, Elections and Referendums Act 2000 (PPERA)),
(iv) a permitted participant at a referendum under Schedule 15 of PPERA, or
(v) any other regulated entity under Schedule 7 of PPERA, including holders of elective office, members of political parties, and members’ associations,
and the entity has not made in written form to the recipient the declaration specified in subsection (2) of this section; and
(b) the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.
(2) The declaration required by (1)(a) is that the company or LLP’s profits generated and taxable within the UK over the previous 12 months are greater than the value of the donation given.
(3) A declaration under this section must also state the company or LLP’s full name, address and registration number.
(4) A person who knowingly or recklessly makes a false declaration under this section commits an offence attracting the following penalties—
(a) on summary conviction in England and Wales or Scotland: to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both);
(b) on summary conviction in Northern Ireland: to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum (or both);
(c) on conviction on indictment: to imprisonment for a term not exceeding 12 months or a fine (or both).
(5) The Secretary of State may by regulations make provision requiring a declaration under this section to be retained for a specified period.
(6) The requirement in subsection (1) does not apply where, by reason of section 71B(1)(b) of PPERA, the entity by whom the donation would be made is a permissible donor in relation to the donation at the time of its receipt by the party.’
This new clause is intended to require that any donations made by UK companies or limited liability partnerships come from sources generating profits made by genuine commercial activity carried out within the UK, and prevent donations of foreign or unknown provenance from being channelled through UK companies or LLPs into regulated political entities (political parties, third parties, campaigners at referendums, candidates etc.)
New clause 21—Report on co-ordination and co-operation—
‘The Secretary of State must lay a report before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, setting out progress in co-ordination and co-operation in relation to this Act and (in particular) an assessment of the effectiveness of information-sharing in relation to entities registered or operating in—
(a) the Crown Dependencies (the Bailiwicks of Jersey and Guernsey, and the Isle of Man), and
(b) the British Overseas Territories (Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat and Pitcairn Islands.’
This new clause requires annual reports on transparency and enforcement in the Crown Dependencies and the British Overseas Territories.
New clause 22—Report on resources for implementing this Act—
‘(1) The Secretary of State must lay a report before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, setting out the funding and achievements in relation to this Act of—
(a) National Crime Agency and
(b) the Office of Financial Sanctions Implementation,
in the most recent year ending 31 March, with an assessment by the Comptroller and Auditor-General of value for money of each of those organisations.
(2) Each report under subsection (1) must be accompanied by—
(a) an assessment from the organisation concerned of the adequacy of the long-term financing provided by the Secretary of State, and
(b) an assessment by that organisation of the expected outcomes in terms of performance and value for money, if funding for the next financial year was increased by 20%
(3) Before laying a report under subsection (1), the Secretary of State must consult the Scottish Ministers.’
The intention of this new clause is to ensure parliamentary oversight of the funding of the National Crime Agency and Office of Financial Sanctions in relation to the implementation of this Act.
New clause 23—Scottish Limited Partnerships—
‘(1) The Secretary of State must consult the Scottish Ministers on the application of this Act to Scottish limited partnerships.
(2) The Secretary of State may make regulations, including supplementary, incidental and consequential provision, to apply any provision in this Act to Scottish limited partnerships.
(3) Regulations made under subsection (2) with the consent of the Scottish Ministers are subject to the negative procedure.
(4) Regulations made under subsection (2) which do not have the consent of the Scottish Ministers are subject to the affirmative procedure.’
The intention of this new clause is to ensure that Scottish limited partnerships are covered by the provisions in the Bill.
New clause 24—Review of funding arrangements for enforcement agencies—
‘(1) The Secretary of State must conduct a review of the suitability of the funding arrangements for enforcement agencies in light of the provisions of this Act and in connection with the wider context of economic crime.
(2) The report of the findings of the review under subsection (1) must be published and laid before Parliament within 3 months of this Act being passed.’
This new clause would require the Secretary of State to conduct a review of the funding arrangements for enforcement agencies in light of the provisions of the Bill and in relation to economic crime more broadly.
New clause 25—Reports on operation of Act—
‘(1) The Secretary of State must lay before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, a report on the operation of this Act.
(2) The Secretary of State must also lay before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, a report from the register of companies in England and Wales on the operation of this Act.’
The purpose of this new clause is to ensure that Parliament is regularly informed about the operation of this Act.
New clause 26—Designation of persons under sanctions regulations: reform—
‘(1) The Sanctions and Anti-Money Laundering Act 2018 is amended as follows.
(2) In section 11 (designation of a person by name under a designation power), leave out subsection (2)(b)(ii).
(3) In section 12 (designation of persons by description under a designation power), leave out subsection (5)(b)(ii).’
This new clause would amend the Sanctions and Anti-Money Laundering Act 2018. It would remove the requirement that a Minister, when designating a person by name or persons of a specified description in regulations made under that Act, to have regard to the likely significant effects of the designation on those persons.
New clause 27—Commission for the Protection of Whistleblowers (No.2)—
‘(1) The Secretary of State shall establish a Commission for the Protection of Whistleblowers for the purpose of promoting transparency in relation to breaches of the provisions of this Act.
(2) The Commission for the Protection of Whistleblowers must work with relevant authorities to ensure that any concerns raised by whistleblowers in relation to breaches of the provisions of this Act are dealt with responsibly and effectively by the relevant authorities.’
New clause 28—Emergency asset-freezing orders—
‘(1) The Secretary of State may make an unexplained wealth order in respect of any property or cash in whatever form, including sums held in blockchain accounts, that is held (or that the Secretary of State has reason to believe that is held) by or on behalf of a designated person.
(2) The Secretary of State may make an interim freezing order in respect of the property or cash in whatever form, including blockchain, if the Prime Minister considers it necessary to do so for the purposes of avoiding the risk of any recovery order that might subsequently be obtained being frustrated, and that it is in the interests of national security that the order be made.
(3) An interim freezing order has the same meaning as in section 362J of the Proceeds of Crime Act 2002.
(4) The Secretary of State may designate under subsection (1) any person whom Secretary of State considers meets, or is likely to meet, the criteria for sanctions to be imposed under the Sanctions and Anti-Money Laundering Act 2018.
(5) The power in this section lapses 6 months after the date on which this Act is passed, unless the Secretary of State makes an order to continue this section in force for a further period of up to six months.
(6) An order under subsection (4) may be made more than once, but every such order may be made only after a draft of the order has been approved by resolution of each House of Parliament.’
The intention of this new clause is to provide a temporary emergency power to freeze the assets of individuals, companies or other entities in order to prevent asset flight before sanctions are in place.
New clause 29—Asset freezing in respect of individuals considered for sanctions—
‘(1) The Secretary of State may by notice publish the name of a person being considered as a subject for sanctions.
(2) A person in respect of whom a notice has been published under subsection (1) is immediately subject to the provisions of this section.
(3) A person in respect of whom a notice has been published under subsection (1) is prohibited from—
(a) selling any assets they own or have an interest in,
(b) moving any assets they own or have an interest in out of the United Kingdom, or
(c) moving any of their funds out of the United Kingdom.
(4) ‘Assets’ in subsection (3)(a) or (b) includes (but is not limited to)—
(a) land;
(b) houses, flats or other private accommodation;
(c) commercial, industrial, agricultural and other buildings, premises or property;
(d) businesses;
(e) personal possessions, works of art, jewellery or collectibles with an individual value of more than £500;
(f) motor vehicles;
(g) yachts or boats; and
(h) aircraft.
(5) ‘Funds’ in subsection (3)(c) means financial assets and economic benefits of any kind, including (but not limited to)—
(a) gold, cash, cheques, claims on money, drafts, money orders and other payment instruments;
(b) deposits with relevant institutions or other persons, balances on accounts, debts and debt obligations;
(c) publicly and privately traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivative products;
(d) interest, dividends or other income on or value accruing from or generated by assets;
(e) credit, rights of set-off, guarantees, performance bonds or other financial commitments;
(f) (letters of credit, bills of lading, bills of sale; and
(g) documents providing evidence of an interest in funds or financial resources.
(6) A person who breaches any prohibition under this section commits an offence.
(7) A person who engages in an activity knowing or intending that it will enable or facilitate the commission by another person of an offence under paragraph (6) commits an offence.
(8) A person guilty of an offence under subsection (6) is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both;
(b) on summary conviction—
(i) to imprisonment for a term not exceeding six months; or
(ii) to a fine which in Scotland or Northern Ireland may not exceed the statutory maximum,
(None) or to both.
(9) A person guilty of an offence under subsection (7) is liable on summary conviction—
(a) to imprisonment for a term not exceeding six months; or
(b) to a fine which in Scotland or Northern Ireland may not exceed level 5 on the standard scale,
or to both.’
This new clause would prevent individuals whom the Secretary of State has named as being considered as a subject for sanctions from selling their assets or moving funds or assets out of the UK.
New clause 30—Proposals for enforcement agencies to retained recovered wealth—
‘Within 28 days of this Act being passed, the Secretary of State must publish and lay before Parliament a report setting out proposals to allow for the wealth recovered in connection with the use of unexplained wealth orders and other anti-corruption powers under the Proceeds of Crime Act 2002 and the Criminal Finances Act 2017 to be retained by the agencies involved in countering economic crime.’
This new clause would require the Secretary of State, within 28 days of the Bill being passed, to publish and lay before Parliament a report setting out proposals to allow for the wealth recovered in connection with the use of unexplained wealth orders and other anti-corruption powers to be retained by the relevant enforcement agencies.
Amendment 28, page 35, line 3, schedule 1, at end insert—
“(1A) The required information about an individual owner who is not a British citizen must include information about whether that individual has ever held a Tier 1 (investor) visa issued in accordance with paragraphs 245E to 245EF of the Immigration Rules.”
This amendment would ensure transparency over the use of overseas entities by individuals who have held so-called golden visas.
Amendment 40, in schedule 1, page 35, line 38, at end insert—
“6 In a case where Condition 5 in paragraph 6 of Schedule 2 is met in relation to the registrable beneficial owner, the required information includes details of the role of the beneficial owner in relation to the trust.”
This amendment would ensure that the required information includes details of the role of the beneficial owner in relation to a trust, where a person controls a trust which owns shares, has voting rights, can appoint or remove directors or exercise significant influence or control over an entity.
That schedule 1 be the First schedule to the Bill.
Amendment 3, in schedule 2, page 37, line 30, at end insert—
“4A Any individual trust, company, government or public authority wherever resident shall be treated as a registrable beneficial owner in relation to an overseas entity for the purposes of this Act if a beneficial owner of a qualifying estate as defined in Schedule 4A that is held by the overseas entity whether or not the individual trust, company, government or public authority holds itself any interest in that overseas entity.
4B In relation to a trust which is to be treated as a registrable beneficial owner, full details shall be given in the registration of the senior trustees and principal beneficiaries.”
The intention of this amendment is to facilitate the identification of the beneficial owners of registered trusts.
Amendment 18, page 38, line 5, leave out “25%” and insert “10%”.
The intention of this amendment is to define as a beneficial owner a person who holds more than 10% of the shares in an entity.
Amendment 19, page 38, line 8, leave out “25%” and insert “10%”.
The intention of this amendment is to define as a beneficial owner a person who holds more than 10% of the voting rights in an entity.
Amendment 39, page 38, line 23, at end insert—
‘6A (1) A person (“A”) is a beneficial owner of an overseas entity or other legal entity (“B”) if—
(a) A is closely connected to a person (“C”) to whom one or more of the conditions in paragraph 6 applies; and
(b) A—
(i) benefits directly from C’s role in respect of B, or
(ii) previously exercised the role in relation to B that is now exercised by C.
(2) For the purposes of this Schedule two persons are “closely connected” if—
(a) they are married to one another;
(b) they are in a civil partnership with one another;
(c) one person is the parent of the other.
(d) one person is the brother or sister of the other.
(3) Where this paragraph applies, the required information under Schedule 1 must be provided in a single statement in relation to both A and C.’
Amendment 20, page 40, line 34, leave out “25%” and insert “10%”.
This amendment is consequential on Amendment 18.
Amendment 21, page 40, line 36, leave out “25%” and insert “10%”.
This amendment is consequential on Amendment 18.
Amendment 22, page 41, line 1, leave out “25%” and insert “10%”.
This amendment is consequential on Amendment 19.
Amendment 23, page 41, line 2, leave out “25%” and insert “10%”.
This amendment is consequential on Amendment 19.
That schedule 2 be the Second schedule to the Bill.
Amendment 13, in schedule 3, page 45, line 10, leave out paragraph (b).
This amendment would require the registrar to enter a restriction in the register in relation to a qualifying estate in which an overseas entity is registered as the proprietor regardless of the date of the registration.
Government amendment 55.
Amendment 15, page 48, line 20, leave out “18 months” and insert
“save as provided for by section (Transitional period for qualifying estates) 28 days save as provided for by section (Transitional period for qualifying estates)”.
This amendment would reduce the period for registration as an overseas entity within from 18 months to 28 days save as provided for by NC6.
Amendment 14, page 48, line 26, leave out paragraph (b)
This amendment would extend the offence to all overseas entities, and every officer of the entity in default regardless of the date of the registration.
Manuscript amendment 64, page 49, line 9, leave out from “estate” to the end of line 12 and insert “from the commencement date”.
Government amendment 56.
Amendment 16, page 49, line 11, leave out “18 months” and insert
“28 days save as provided for by section (Transitional period for qualifying estates)”.
This amendment would reduce the period from 18 months to 28 days for entering the restriction relating to a qualifying estate save as provided for by NC6.
That schedule 3 be the Third schedule to the Bill.
Government amendment 57.
Amendment 17, in schedule 4, page 57, line 24, leave out “18 months” and insert “6 months”.
This amendment would reduce the transitional period from 18 months to 28 days save as provided for by NC6.
Government amendment 58.
That schedules 4 and 5 be the Third and Fourth schedules to the Bill.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Over the last 10 days, the world has watched the actions of Vladimir Putin in shock and horror. The ability to tackle dirty money and impose economic sanctions has never been so important. We are putting the Bill through in an expedited way. It is important that I put on the record what the Bill will do and set out the intention behind the Government amendments. I will seek to be brief because a number of right hon. and hon. Members are keen to speak to their amendments.
As my right hon. Friend the Home Secretary set out earlier, the Bill has four main objectives. First, it will prevent and combat the use of land in the UK for money laundering purposes through the establishment of the public register of beneficial owners of overseas entities owning land in the UK, which will be held by Companies House. Secondly, it will reform the UK’s unexplained wealth order regime to enable law enforcement to investigate the origin of properties and recover the proceeds of crime. Those measures remove key barriers to the effective use of UWO powers and will increase and reinforce operational confidence in relation to their use. Thirdly, it will amend financial sanctions legislation, including the test for imposing monetary penalties and powers, to publicly name those breaching financial sanctions. That will make it easier for the Government to act against those who fail to comply with sanctions. Fourthly, it will amend the Sanctions and Anti-Money Laundering Act 2018 to streamline the current legislation so the Government can respond even more swiftly and effectively to sanction oligarchs and other businesses associated with Putin’s regime.
Part 1 establishes the new register of overseas entities, which will require overseas companies owning or buying property in the UK to provide the information about their true owners. Clauses 1 to 6 provide an overview of the register, define an overseas entity and establish the register and registration process. Clauses 7 to 11 set out the duties for updating and removing entities from the register. Clauses 12 to 19 set out mechanisms for obtaining, updating and verifying information, penalties for non-compliance and exemptions to various requirements.
Chris Bryant (Rhondda) (Lab)
Amendments 24 and 25 would require that, when someone is registering or updating, they also have to notify the fact that one of the people to whom they are referring as an overseas person is a sanctioned individual. Will the Government accept those amendments tonight?
Paul Scully
I thank the hon. Gentleman for his intervention. I have spoken to colleagues across the House. We will certainly look at how to draft the measure correctly to ensure that it serves its purpose. We will certainly look in the other place to debate that further.
Paul Scully
I will not give way for a second, because I want to ensure that we can cover the ground. I will deal with some of the opposing amendments at the right time: at the end of the Committee.
Clauses 20 to 30 cover the annotation and inspection of the register, and the disclosure, protection, correction and removal of information. Clauses 31 to 39 cover measures including the false statement offence and amendments to land registration as well as provisions about offences and penalties. The schedules define key terms such as “registrable beneficial owner” and cover amendments to land registration laws, for example, regarding land ownership and transactions for England and Wales, Scotland and Northern Ireland respectively.
Stewart Hosie
Schedule 2, paragraph 6 describes a beneficial owner as meaning someone, for example, who
“has the right to exercise, or actually exercises, significant…control over”
an “entity”. However, part 4 of schedule 2—on beneficial owners exempt from registration—goes on to describe such a person as someone who has
“the right to exercise, or actually exercises, significant influence or control over”
an “entity”. It may be that that apparent confusion is dealt with in part 3 of schedule 2, which deals with an entity
“subject to its own disclosure requirements”,
but it is not at all clear whether someone has to be a registrable beneficial owner, or whether they are exempt for precisely the same criteria.
Paul Scully
I thank the right hon. Gentleman for that point; it comes back to something that was said in the previous debate about persons of significant control, which I did not address at the time. However, I will take that point away and discuss it with the right hon. Member for Barking (Dame Margaret Hodge) and others to make sure that we can get any drafting on that exactly right.
Paul Scully
I will not just because I want to make sure that we can cover all the areas, and we will be short of time.
Important changes in part 2 include changing the unexplained wealth order regime, increasing the scope of the existing powers to ensure that an enforcement authority can obtain the information that they need even when the assets in question are held in trusts or other complex ownership structures. That is to ensure that the true owners cannot hide their claim over assets to avoid the force of the law. The introduction of an alternative test to the existing income requirement also provides flexibility for agencies to tailor the UWO applications to the facts of a case.
Clauses 44 to 47 will mitigate the significant operational risks to an enforcement authority and provide a more encouraging basis for them to use their powers to seek a UWO: first, by extending the period for which an interim freezing order has effect, enabling agencies to review material provided in response to a UWO without significant time pressures; and secondly, by reforming the cost rules to protect law enforcement against incurring substantial legal costs following an adverse ruling.
Part 3—clauses 48 to 51—strengthens the financial sanctions legislation to change the monetary penalty test and internal review process. Those changes will allow the Office of Financial Sanctions Implementation to publicly name sanctions breaches even when no monetary penalty has been imposed and allow for greater information sharing across Government.
We are really grateful for the support of all parties in passing this legislation as quickly as possible, but in the light of the deteriorating situation and the Government’s desire to work together to strengthen and accelerate this package, I want to outline further measures that we have tabled as Government amendments.
New clauses 32 to 40 will amend the Sanctions and Anti-Money Laundering Act 2018 to streamline the current legislation so that we can respond even more swiftly and effectively to sanction oligarchs, individuals and businesses associated with Putin’s regime and others like them in the future. New clause 32 will simplify the procedural requirements that can delay the implementation of sanctions. New clauses 33 and 34 are designed to streamline the designation of individuals and entities, allowing us better to respond to fast-moving events. New clause 36 will ensure that the proposed changes in new clauses 33 to 35 will apply to sanctions regulations that are already in place. New clause 37 will remove the requirement for Ministers to review each sanctions regime every year and to review each designation every three years. That will free up vital resource to focus on developing new designations.
Dame Angela Eagle
I thank the Minister for giving way finally, but it all counts. He seemed to be saying to colleagues earlier that his attitude to our amendments is that he is willing to discuss them after the Commons stages of the Bill and to do something in the Lords. Is that what he is saying? Is he telling us today that the Government will not accept any more Opposition or Back-Bench amendments and that he will leave it to the House of Lords to change these things? Clearly, if that is going to be his attitude, we need to know.
Paul Scully
I will cover the amendments more fully in my closing remarks, once they have been spoken to. None the less, I want to ensure that the amendments with which I have sympathy do exactly what they are intended to do and that the drafting is right. I am happy to work with colleagues who have tabled them to make sure that we can get that right and to see what more we can do in the other place.
Sammy Wilson (East Antrim) (DUP)
Does the Minister accept that many of the amendments have been tabled today because people genuinely want to make the Bill better? There would be no better signal to send from this House tonight than the Government accepting the reasonable amendments, regardless of where they come from, if it is believed that they strengthen the Bill. If we find that they do not do what they are meant to, the opportunity is available to make them do that in the other House. At least that would send a great message from this House tonight that there is widespread support for the Bill and that the Government are listening.
Paul Scully
There are a number of amendments and they do not all do what is intended. On amendments 24 to 26, I respectfully ask the Members concerned not to push them to a vote, but I will happily work with them to see what more we can do in the other place.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
My understanding is that the Government accept amendments 24 to 26 in principle and will work in the Lords to put something in the Bill that delivers what they suggest. Am I correct in that?
Paul Scully
Essentially, yes. We want to make sure that we can work with hon. Members on that. I do not want to accept all those amendments here and now, but I want to make sure that we can get it right in the other place, working with them at that stage.
Mr David Davis (Haltemprice and Howden) (Con)
I would like this to be rendered in English for the world at large to understand. If the Minister puts into law in the Lords all the amendments that we proposed, will it not still be the case that nothing can be done to stop a Russian oligarch from moving, selling or transferring his assets, even if we know all about it, until the moment when he is actually sanctioned?
Paul Scully
First, I thought that when I said, “Essentially, yes,” it was a clear, two-word answer to a simple question. I will cover my right hon. Friend’s amendments in my closing remarks, but I wanted to speak to the Government amendments at this point. However, his new clause 29 would give a huge amount of powers not just to the Foreign Secretary in relation to Putin’s regime, but to future Foreign Secretaries. We need to tread carefully and look at that carefully before the House acts in that way.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
We can see that the sanctions regulations will become much stronger, but our sanctions regime is still a long way short of the kind of sanctions that have been imposed on, for example, Iran, whereby we are able to sanction secondary entities trading with sanctioned companies. Does this legislation allow us to enforce Iran-like sanctions on Russia, because ultimately, that is what will be needed?
Paul Scully
I think the right hon. Gentleman comes from a place of supporting the proposal from my right hon. Friend the Member for Haltemprice and Howden (Mr Davis). I do not want delay the Committee in debating the amendments in full before I respond towards the end of the debate.
On the provisions on the register of overseas entities, we will increase the ceiling of criminal penalties for non-compliance from £500 a day to up to £2,500. Again, we have listened to representations from Members across the House. We are increasing the limit to allow for stronger enforcement mechanisms, but, by making it “up to” that amount, we are also making sure that we do not criminalise people who do not have their house in order but who are using these entities for perfectly legitimate reasons.
We are reducing the transition period for existing overseas entities to register their beneficial owners from 18 months to six months. We want to ensure that there is no place for corrupt elites and kleptocrats to hide, but there are many legitimate individuals and businesses that are likely to be holding property through overseas entities for understandable reasons, such as personal security. As I said, we want to make sure that we can work with people from across the House, including my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), to make that more secure and to see what more we can do to tackle the issues that we face here and now. It is important to remember that once the register is in place, new transactions will be caught on day one.
I am grateful for the engagement of the Scottish Government on part 3 of schedule 4. We are committed to consulting Scottish Ministers on regulations made under that part that contain provisions within the legislative competence of the Scottish Parliament. Similarly, we are committed to consulting Northern Ireland Ministers on regulations made under the similar mechanism for Northern Ireland in clause 32(4), (5) and (6).
Sammy Wilson
There should not be any part of the United Kingdom where money can be hidden or moved to be hidden. Will the Minister clarify a point that I was not quite clear about from his response to my hon. Friend the Member for Belfast East (Gavin Robinson) on Second Reading? Does the relevant schedule require a legislative consent motion from the Northern Ireland Assembly, or does its inclusion in the Bill mean that all the registration requirements and so on will apply to Northern Ireland regardless?
Paul Scully
As I say, the Bill touches on devolved matters in Scotland and Northern Ireland in particular. Ideally we would have an LCM, but I do not think that we can achieve one, given the current status and the timescale in which we are trying to formulate these measures. However, we are working with representatives in the Northern Ireland Assembly and the Scottish Government to ensure that we can carry on our positive approach.
Sammy Wilson
Given what has happened in Northern Ireland as a result of the Northern Ireland protocol and so on, will the Minister confirm just for clarity that if a legislative consent motion is not available, that will not mean that this legislation cannot apply in Northern Ireland?
Paul Scully
We will be moving on it so that it does apply in Northern Ireland. It is really important that we get this running so that there is no hiding place in any part of the UK for dirty money. It is important that we all work together on this, and I am really pleased about the positive nature of that work.
In that spirit of working together to strengthen and accelerate this package, I urge all parties to accept our Government amendments. I commend them to the Committee.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
On my own behalf and on behalf of my hon. Friend the Member for Halifax (Holly Lynch), it is a pleasure to speak in support of the amendments tabled in our names and the name of the Leader of the Opposition. I echo the sentiments that the Minister expressed about the horror of what is happening in Ukraine and about the importance of today’s debate. We stand in solidarity with the people of Ukraine.
We need the Bill to succeed and to achieve its goals. The Government have dragged their feet on stopping dirty money flowing through our economy. These measures were first promised six years ago, and even now the Bill will be implemented too slowly and with serious loopholes. I thank the Minister for our conversation last week and for tabling amendments that recognise Labour’s concerns about the Bill, but key problems remain.
Time is tight, so I will keep my remarks brief on our amendments and our concerns about the Bill. Part 1, “Registration of overseas entities”, establishes a public register of beneficial owners of foreign entities that own or buy land in the UK. Far too many corrupt individuals are currently hiding their identity behind a foreign company. Under the Bill, a foreign entity need only annually update its entry on the register. We are concerned that that gives the opportunity to register an entity in a non-controversial individual’s name, change the beneficial owner the following day and have 12 months before having to declare the change, by which time property can be sold and money laundered without a record.
The integrity and quality of the data on the register will matter. From the start, the register needs a framework of rules that commands confidence and ensures the completeness and accuracy of information, so our amendments 5 and 6 to clause 7 would require that entries on the register be updated within 14 days of any trigger event, namely the change or removal of a beneficial owner. UK companies have clear obligations to notify Companies House in the days after an ownership change, so why do overseas entities have a year to do the same? Have the Government considered that issue? What measures will they take to address it?
Our amendments 7 and 8 to clause 8 relate to the £500 fine that the Bill would impose on entities that fail to update the register. The idea that such a fine would deter those who fail to comply is frankly ridiculous, so we support Government amendments 45 and 46, which directly replace ours and will raise the fine to at least £2,500 a day.
Our amendments 10 to 12 focus on verification. The Government have accepted Labour’s argument that a verification process needs to be established before the register is operational, so they have tabled amendment 49, which we support. It was unacceptable that the register would have become operational without verification regulations. Will the Minister therefore confirm when the secondary legislation that is needed to design that verification process will be published?
Labour has a wider concern that the Government have not yet addressed. The Bill does not stipulate that verification must take place between an application being made and the registrar entering the overseas entity on the register and allocating an overseas entity ID. We are clear that the regulations that the Government introduce must specify that the registrar must take action to verify the registrable beneficial owners before an entity is put on the register; it is not good enough to rely on the compliance of the entity itself. I would be grateful if the Minister confirmed that point.
Our amendments 15 to 17 would shorten the transitional period. We urgently need to close in on Putin’s cronies who have illicit money in our economy. This is about not just oligarchs, but money launderers and tax evaders. We need to know where the money is and who owns what in Britain. Transparency is vital and the register is essential.
The Government have seen some sense and have reduced the transitional period from 18 months to six months, but we are not being unreasonable in saying that it should be 28 days. As my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) said, this legislation was promised by David Cameron in 2016 and began its passage in 2018, so when we say 28 days, we really mean 28 days plus the preceding six years. Six months still provides ample time for criminals to sell properties and find other assets in which to invest—a concern that has rightly been raised by hon. Members, including in today’s manuscript amendments. Labour’s amendments 15, 16 and 17 to schedules 3 and 4 would reduce the transitional period to 28 days, which in our view would provide enough time for overseas entities to get documents in order, while recognising the need to act urgently.
But that is not enough. It is unacceptable to say that the Bill applies not to all properties owned by overseas entities, but only to those bought after 1999 in England and Wales and after 2014—just eight years ago—in Scotland. It does not matter whether corrupt oligarchs bought property four weeks or four decades ago; the point is that UK property should not be used as a vehicle for money laundering. Under Labour’s amendments 9, 13 and 14, all foreign-bought properties would fall within the Bill’s scope, regardless of when they were purchased. We recognise that registering properties bought before 1999 in England and Wales or 2014 in Scotland may take more time, for reasons that the Minister has discussed, so our new clause 6 would allow an 18-month transitional period for such properties, but it is important that we make sure that they are included in the scope of the Bill.
I turn to reform of Companies House. Changes to Companies House’s regulation are long overdue. It beggars belief that despite how long the issue has been on the agenda, all we have had from the Government in the past week is a White Paper. I know that the Minister knows this is urgent. The legal framework in which Companies House operates needs an overhaul. It has been called for by business, by law enforcement agencies and by civil society. Companies House is a key tool in our fight against economic crime. That is why Labour has tabled new clause 7, which would require that the Secretary of State lay draft legislation on Companies House reform within 28 days of this Act coming into force. I acknowledge the arguments being made by the hon. Member for Glasgow Central (Alison Thewliss) in new clause 4 on some of the areas associated with Companies House reform and verification.
Let me turn briefly to parts 2 and 3 of the Bill, which relate to unexplained wealth orders and the Sanctions and Anti-Money Laundering Act 2018. Since their introduction in January 2018, UWOs have failed to live up to expectations. The Government expected them to be used 20 times a year, but the National Crime Agency has so far obtained only nine, with none in the past two years. We welcome measures to make these orders more effective. Clause 40 grants enforcement agencies the ability to apply for more time to consider the information related to UWOs. The Government have accepted the principle of Labour’s new clause 8, which would require an annual update to be made to the House on the use of UWOs, in their new clause 31. However, these changes on their own will not lead to more effective use of UWOs.
The Prime Minister announced the creation of a combating kleptocracy cell in the NCA, which is welcome. However, money laundering prosecutions have dropped by 38% in the past five years and the NCA’s budget has dropped by 4.2% in real terms since 2016. As the Treasury Committee made clear in January, on financial crime there is a “mismatch” between the scale of the problem and the Government’s response. We all recall as well the Business Secretary’s suggestion that fraud is not a crime affecting most people—he could not be more wrong. Economic crime affects us all, and the Government must match the reforms with adequate resources. So our new clause 30 calls on the Government to create a funding plan that sees enforcement and investigative agencies benefit from the assets seized. The Government have so far failed to adequately resource this vital work, but this new clause would allow for a rebalancing of the risk appetite, which the Government are seeking to address with their cost capping proposal in clauses 46 and 47.
The Government have also accepted, with their amendments 59 to 62 and new clauses 32 and 40, Labour’s argument that the designation process under the 2018 Act was not fit for purpose. It cannot be right that the UK is slower at targeting oligarchs who prop up Putin than the EU, where unanimity is required across 27 member states. It is also worth noting that in all four of the NCA’s high-profile dirty money cases brought in the past two years, all of those under investigation had entered the UK with a golden visa. We have not tolerated dirty money but courted it. We must amend the Act to remove the barriers that stop the UK keeping pace with allies on Russian sanctions. We are pleased that the Government have agreed with us on that, and we expect to see the raft of promised designations soon.
Finally, important amendments have also been tabled by my hon. Friends the Members for Rhondda (Chris Bryant) and for Walthamstow (Stella Creasy), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Haltemprice and Howden (Mr Davis). I thank colleagues, including my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), for their commitment and work on tackling economic crime. We support amendments 26, 27, 37 and 38, new clauses 2 and 9, and new clause 29, among others. They would tighten up the register requirements and enforcement; address the issue of a lack of resources; and strengthen the effectiveness and powers of the registrar.
This Bill is long overdue and we support its passage. We acknowledge that the Government have taken on board a number of our amendments in the past few days, but we know that a lot more needs to be done. I cannot stress enough how important it is that the UK acts now and acts effectively to start to put right our embarrassing reputation as an international soft touch on fraud and money laundering. Putin and those who prop him up should have nowhere to hide, least of all in the UK. I hope that Members from across the House will support us in the proposals we have put forward to improve the Bill.
Sir Iain Duncan Smith
I am grateful to be called so early in the debate, and I rise to speak to the amendments standing in my name and those of colleagues on both sides of the House. I refer to amendments 24 to 27, and new clause 10. First, let me deal with new clause 10 and then come back to the main issues associated with the other amendments.
New clause 10 is really about the issue of debate in this House and being able to scrutinise properly the nature of what is being done or not being done to those whose ill-gotten gains are being used for purposes they should not be. It would place an obligation on the Government to schedule a debate on the annual sanctions regulations report. I know that the Government argue that that is the responsibility of the House, and of course it is, but it is also important that this provision would be specifically tied to this particular issue. There is a reason for that: it is too easy for Governments to find lots of reasons why they do not end up doing that debate or they schedule it somewhere else and it gets pushed away—I say that having served in Governments myself. The new clause would mean that within 10 days of the report there would have to be a debate. That is important as it opens this up to a proper debate and proper scrutiny. Therefore, I wish that the Government will give it further thought, but I will come to that later on, if necessary.
I return to the key area where I and others have tabled amendments. Amendments 24 to 27 are linked and consequential, but, crucially, they are linked to clause 31. Like others, I had concerns about that clause because it seemed to leave a back door open to any enabler to avoid any requirements for reporting by appealing to the excuse that they did not know that the assets or money they were dealing with had any link to any individual or entity. I draw the Minister’s attention to what clause 31 actually says. Subsection (1) uses the words:
“It is an offence for a person knowingly or recklessly”.
So the excuse is, “I didn’t know” or, “I’m not acting recklessly, because I didn’t know”. It is peculiar that we would want in a Bill a defence that someone may wish to use subsequently if they were in court. This will mean that they will never get to court if they challenge the Government.
Sir Iain Duncan Smith
I will give way first to the hon. Member for Walthamstow (Stella Creasy) and then to the hon. Member for Oxford West and Abingdon (Layla Moran).
Stella Creasy
I thank my neighbour for giving way. Does he agree that many of our constituents will be looking at this and will be bemused, because when it comes to their own tax affairs they do not get the same leeway? They can be penalised for acting both recklessly and carelessly. So if we want to make sure that this legislation is watertight, we should take a lesson from Her Majesty’s Revenue and Customs and make sure that we are not giving people a loophole in that way, especially if they are oligarchs.
Sir Iain Duncan Smith
Yes. I take the hon. Lady’s point. The point I am making is that we should rightly assume that this is their responsibility—there is no let-out. If they misrepresent their position, they should face the full rigours of the law. It should not be a case that they can defend themselves before—
Sir Iain Duncan Smith
First, I will give way to the hon. Member for Oxford West and Abingdon.
Layla Moran
I was going to make the point that was just made: we should expect oligarchs to abide by the same rules that all the rest of us do.
Sir Iain Duncan Smith
We all have to stop agreeing like this, as it will give the House a bad reputation.
Sir Robert Buckland
My right hon. Friend is making an important point. I have looked at these amendments. Is not the best way to achieve his aim to make this offence a strict liability one, which does not require a state of mind and simply involves a set of facts having been established? There could be a reverse burden, whereby the subject demonstrates that they have not acted unlawfully. Strict liability might be the best way to achieve his aim.
Sir Iain Duncan Smith
I am grateful to my right hon. and learned Friend. I always bow to him in the knowledge of the law, as of course I would. I thought he was an excellent Justice Secretary—I will just slip that one in, gratis, and I am sure he can dine out on it. I agree with him wholeheartedly, because what he says is right. I will come back to the flexibility that is required, but I come to the principle of what we are saying. We are seeking to strike out that little lacuna that results from the words “knowingly or recklessly”. That would make this about the responsibility of the person concerned and that would be it—there would be no let-outs, no issues and no quibbling. This is the key. Everything in the other amendments is relevant to it; they merely backfill various areas, and it is important that they should refer to clause 31. They make it clear that responsibility rests with the individual—the entity, should I say—in this particular case.
Ms Nusrat Ghani (Wealden) (Con)
It is important to note that these amendments in my right hon. Friend’s name, my name and those of others do not set us apart from is happening in the rest of Europe and in America. America is applying the same principles. Although the Bill closes the front door on much of Putin’s dirty money, we must ensure that no back door is open. We should therefore be working in line with our NATO allies, and with many other European colleagues as well.
Sir Iain Duncan Smith
That is exactly correct. All we are doing is asking for the UK to be at the same level as the United States, and I do not think that that is asking too much. I am co-chair of the all-party parliamentary group on Magnitsky sanctions, and this is very much what we are driving at. In fact, I love the idea that an individual who is sanctioned in the United States should be sanctioned here, and that if we sanction individuals the United States should sanction them as well, and that the same should happen in Europe. We would have this common purpose: there is nowhere for those people to go. They are sanctioned, full stop, and they cannot use their ill-gotten money anywhere.
Anthony Mangnall (Totnes) (Con)
Can my right hon. Friend tell me whether his amendment, and the Bill, will address the issue of nominees? That seems to be a way in which someone could get away with it: “I can hand my property to a nominee.” Do the enforcement mechanism and the reference to named individuals enable us to stop them doing that?
Sir Iain Duncan Smith
They should, because the individual has to declare the whole chain. “Not knowing” would be no excuse. It would be the responsibility of individuals to know who those nominees were and to declare them They could not defend themselves. What my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) suggested might be a better way of doing this, but my point is that my amendment would nevertheless address it.
Kevin Hollinrake (Thirsk and Malton) (Con)
I am not sure that my right hon. Friend is correct. The Bill defines a legal entity as
“a body corporate, partnership or other entity”.
rather than an individual. I am not sure that, in those circumstances, the amendment would cover the individual.
Sir Iain Duncan Smith
It might not, but I think it would, because it covers the information that individuals are asked to declare. It may not cover the sanction on the individual, but it covers the knowledge of who that individual is. If there is a better way to do it, however, I am up for it. That is feasible, and it may be that my right hon. and learned Friend’s way of doing it is a better way.
Dame Margaret Hodge (Barking) (Lab)
I think we are all wandering around the same point. May I clarify it? The Minister agreed to look at our amendment 3, which addresses the question of whether this is an entity or an individual, and whether, if it is an entity, that entity can put forward a company provider and thus hide the identity of the owner of the property. The Minister has agreed to look into what could be a loophole in the legislation, and then consult with us on it. I think the point is valid, and I hope that the Minister will look at it and that, between us, we can all close that loophole.
Sir Iain Duncan Smith
I agree that clarity is everything in this instance. The Bill will be going to the other place, and by the time it comes back, we will be looking for those loopholes to be shut down and sorted out.
Robert Jenrick (Newark) (Con)
I do not want to sow further confusion, but I think that the point made by our hon. Friend the Member for Totnes (Anthony Mangnall) is critical. Before the Bill passes into law, we need to understand whether a nominee can be the name at the end of the trail. If that is the case, I am afraid that this register will be largely pointless. If I wanted to conceal the ownership of a property, I would simply set up a shell company in the British Virgin Islands through a nominee, in which case, I am sorry to say, all our efforts today would be for naught. We must resolve that before the Bill completes its passage through both Houses.
Sir Iain Duncan Smith
Let me simply say that the purpose of this debate is to tease out exactly that. I wish that we had less debate on Second Reading and more on the details, but that is water under the bridge, and this is an important factor. In a second—although not quite yet so he need not worry—I will ask my hon. Friend the Minister to explain what he actually plans to do, so that we are clear about that. However, I agree that we need to understand what that relationship is. My assumption was that they come together, but it may not be right, and if it is not right, we will end up back in the courts with delay upon delay and we will never get these people sanctioned.
I know that we must make progress, so I will not go into the details of each amendment, but, as I said earlier, amendments 24 to 27 are connected. We will, I hope, be able to vote on all those amendments, but I am prepared to give some leeway, for the reasons given by the right hon. Member for Barking (Dame Margaret Hodge). Will my hon. Friend the Minister tell me now what his attitude is to amendments 24, 26 and 27?
Paul Scully
I will cover this at the end of the debate, but I should like to work with my right hon. Friend on amendments 24, 25 and 26 to ensure that we can make changes in the other place. However, we want to go further than amendment 27 in the second economic crime Bill.
Sir Iain Duncan Smith
I am grateful to my hon. Friend. I take it from what he has said that he accepts amendments 24, 25 and 26 in principle, and that he will seek in the other place to deliver their meaning through other amendments, so that by the time they return here, this point has been established. May I draw to his attention the debate that we have just had on the definition of whom this provision encompasses? That will be a vital issue, as my hon. Friends have said, but it is not clear. I hope he agrees with me. I will take a nod from him at this point. Hansard can register his nod, because that is how it works.
Sir Iain Duncan Smith
I am grateful.
Let me end by saying to my hon. Friend that this legislation is probably one of those great critical junctures at which we finally decide and agree in this place, as a result of an emergency that is going on elsewhere, that our procedures and our laws are wrong, and that we have to make change. When we have to make change, we should not baulk at it; we should make wholesale change, and ensure that what we deliver leaves the next generation clear about where they will be, and clear about the fact that we did not fail them. I therefore ask my hon. Friend to stick to his agreement with us, and when the Bill comes back, we will look to it. Otherwise we will have to amend the Bill, but I take my hon. Friend at his word.
Alison Thewliss (Glasgow Central) (SNP)
I want to speak about the amendments and new clauses in my name and those of my colleagues. I refer to amendment 41, new clauses 4 and 21 to 23, and amendments 18 to 23 and 40. I have indicated my support for a number of other new clauses and amendments. I dare say that given the cross-party nature of the amendments that were tabled over the weekend, if we had had more time we would have had more names attached to all of them. The Minister would do well to listen to the cross-party calls from Members of both Houses. I have little in common with the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), and I disagree with him vehemently on many issues, but I have signed some of his amendments.
I share the horror felt by my colleagues and my constituents at the news that is coming through from Ukraine. We condemn the flagrant and repeated breaches of the Geneva conventions by Putin and his troops. I thank the people of Glasgow Central who have been raising funds and gathering goods across the constituency, but particularly those at the Hindu mandir, dropping off those goods to help the people fleeing Ukraine. Their sense of humanity has been undoubted, and I hope that it will be met by Ministers—not least the Home Secretary, who disappeared before we could raise further issues with her—because the people of Ukraine deserve our support.
This Bill is patently not enough. The volume of worthy and sensible amendments, and indeed the Government’s own amendments, testify to that. Action is long overdue. Stephen Gethins, Professor of International Relations at St Andrews and our former colleague in the House, has said:
“For years we have turned a blind eye to Putin's dirty money, propaganda and influence in our democracy. Those who called out the corruption were badged as anti-Russian when it was the Russians who were Putin’s first victims. It is a shame that many are only paying attention to his crimes after such grave events. I hope that real action will be taken. After years of inaction we owe the people of Ukraine and Putin’s other victims at least that.”
I agree very much with Stephen Gethins.
The situation we find ourselves in today, legislating in great haste, did not need to happen. This is not new. Putin and his cronies have been shifting their ill-gotten gains through the UK for many years now, unimpeded—and indeed facilitated—by UK Governments of various stripes, while journalists, civil society campaigners and, to their credit, many Members across this House, such as the right hon. Members for Barking (Dame Margaret Hodge) and for Sutton Coldfield (Mr Mitchell), have repeated their calls for action throughout many Bills.
Mr Deputy Speaker (Mr Nigel Evans)
Order. There are far too many private conversations taking place, and I am finding it difficult to hear the hon. Lady.
Alison Thewliss
Thank you, Mr Deputy Speaker. I was talking about people buying their seats at party fundraisers and at the heart of British democracy. That is something that this House should reflect on. This place needs to take a long hard look at itself and at what it has facilitated, allowed and ignored over the course of many years.
We in the SNP welcome this Bill—how could we not?—but we would argue that it is long overdue and does not go nearly far enough. The UK Government’s inaction and prevarication have given the oligarchs a head start to shift their assets, to lawyer up, to step down from companies and boards and to saunter unimpeded to their getaway yachts and go to places that will still have them. Co-ordinated and quick global action, including in the overseas territories, could have made this more difficult, as would action on crypto-assets. The recent Treasury Committee report highlighted the growing role of crypto-assets in economic crime.
We support Labour’s calls to cut the registration of overseas entities to four weeks. We all agree that 18 months was ludicrous, but six months still gives people far too long to shift their ill-gotten gains. I would be grateful if Ministers confirmed what they are doing to monitor asset flight, and if they could provide an estimate of how much money has already left. Our amendments 18 to 23 would lower the threshold for beneficial ownership from 25% to 10%. Evidence already points to the threshold being gamed and to people appointing family members and those they can easily control, and the Government need to be aware of that and do more to prevent it.
Anthony Mangnall
I apologise for interrupting the hon. Lady, who is making a brilliant speech. On her point about assets being handed over, where they are being hidden and the chain involved in these activities, does she agree that insurance companies need to be brought into these measures? Insurance companies have a list of every single asset and item in the name of these individuals, yet over the weekend there were reports that insurance companies were seeing people coming off their lists because they were already moving their assets out.
Alison Thewliss
The hon. Gentleman makes an excellent point, and I hope the Minister was listening carefully. We need to use all the levers at our disposal to trace where these assets are going, who is moving them and who is helping them to do that.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
I am pleased to see the amendments that would lower the threshold to 10%. In the prelegislative scrutiny of the Registration of Overseas Entities Bill, the Government indicated that they were willing to lower that threshold through secondary legislation. Has the hon. Lady received word from the Government that they will now honour that promise that they made to us only a few years ago?
Alison Thewliss
I have not received that assurance from the Minister, but I would be glad to do so. The hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle) and I served on that Bill Committee together, and a lot of the evidence that was given at the time still stands today. Many of the things we were warned about, such as shifting things into trusts, have happened, and the Government need to act on the warnings that they were given.
Turning to schedule 4, the register proposed in the Bill is not as transparent as the Scottish register, which will come into force on 1 April. Transparency International and the Chartered Institute of Taxation have said that the UK Government could learn from Scotland on this. As I say, Scotland’s register of persons holding a controlled interest in land in Scotland goes live on 1 April, and I would like to thank Jennifer Henderson, the Keeper of the Registers of Scotland, and her team of experts for taking the time to meet me last week to discuss this.
Transparency International has warned that this Government’s proposed register could not be as transparent as Scotland’s because the legislation as drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity that in turn owns the property. Scotland’s register notes, per piece of land, who the beneficial owner of the land is. For example, it notes which companies have land registered to them, and who has significant control of those companies. I am sure that I could draw a diagram that would explain this better than my description, but my understanding is that if a holding company has five or six different pieces of land for three oligarchs, the Scottish register would show which oligarch each piece of land belonged to, but that the register as laid out in this Bill would not. I ask the UK Government to consider taking a lesson from Scotland, to speak to Registers of Scotland and to review changes such as this, so that we can properly understand who owns what.
The Chartered Institute of Taxation said that
“if the government’s aim is a public register of ownership of land it does not achieve this”.
It also said:
“The UK Government may also want to look at the Scottish approach which is to reveal the person who has ‘significant influence or control’ over the owner or long-lease tenant of land and property in Scotland.”
According to the Scottish Government, this means that
“it will be possible to look behind every category of entity in Scotland, including overseas entities and trusts, to see who controls land.”
Further to this, I would be grateful if the Minister could provide the clarification that the Law Society of Scotland has asked for on the way in which the two registers will interact, on how any disputes will be resolved—including on what is registered and what takes precedence—and on whether any additional resource will be provided directly from the UK Government to Registers of Scotland so that it can continue this work.
It is vital that Companies House reform does not slip off the agenda. We would have pressed new clause 4 to a vote, had it not been so similar in intention to the official Opposition’s new clause 7. It is unfortunate that all we are getting on Companies House will be a White Paper. We have already had extensive consultation on this, and we know the problems. They are obvious, and the Government have no excuse for not acting on them today.
Dame Angela Eagle
Does the hon. Lady share my frustration, which was widely voiced in the Treasury Committee when we were doing our report on economic crime, that although the Government have known what is wrong with Companies House for a very long time, we have had virtually no movement to reform it except for an announcement that there might be enough money to do so in 2024?
Alison Thewliss
The hon. Lady is right. This is entirely inadequate. With every day that passes, more and more guff gets put on to the Companies House register and the less valuable it becomes as a register.
We need finally to introduce verification. It is beyond belief that there is no Government verification scheme. Filing a tax return or applying for a passport or driving licence all require the use of a Government verification scheme. Graham Barrow, a Companies House expert, has pointed out that people need more ID to take out a library book than to set up a company in this country. That is absolutely ridiculous. Verification, when it is brought in, must also apply retrospectively. Companies House must go back through the register and look at all issues that existed in the past, because there is already so much nonsense in the register that needs to be weeded out, not just for reasons of accuracy but because it is being used to defraud people and by companies that are phoenixing. It is being used for all kinds of things that are resulting in people losing out.
Graham Barrow has also suggested that Companies House verification could reduce incorporations by close to 50% while making practically zero difference to corporate commercial activity in the UK. That shows the level of guff in the Companies House register. The examples of failures of accuracy at Companies House are legion. A Global Witness report in 2019 found an address in London where at least two company service providers appeared to host a number of companies apparently controlled by children under the age of two, who not only had access to the profits of the company but also the right to appoint directors and voting rights. That is quite extraordinary. There are some quite prodigious two-year-olds on that register.
It is long past time to act. The SNP’s new clause 4 would make Companies House an anti-money laundering supervisor, as it is strange that Companies House is not. That would go some way towards closing the door on those who seek to abuse the system. I wrote to the Government consultation three years ago to say that Companies House must have better and more robust mechanisms to ensure the information it holds relating to beneficial ownership is adequate, accurate and current. That still stands today.
There has also been a lack of action on Scottish limited partnerships. When I made my submission to the consultation, no fines had been handed out for non-compliance. Three years and four months later, I am pleased to report that is no longer true. Of the thousands of Scottish limited partnerships that have registered no person of significant control, there has now been a single fine of £210. We can all agree it is not the best deterrent if there is no consequence for not following the rules.
The Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) spoke earlier of action, but action is not impressive if those who have continually not complied with the rules do not even face a fine. That goes for all the mechanisms in the Bill that levy a fine. If the Government will not actually levy a fine and collect the money, there is little point putting it in the Bill.
SNP new clause 23 would ensure that beneficial owners of Scottish limited partnerships must, at last, be published, which would ensure transparency. Scottish limited partnerships are being used, again and again, in nefarious ways to move money and goods around the world. They have been involved in war crimes, child pornography and arms deals. The loopholes in Scottish limited partnerships and at Companies House have to be closed, as they harm not only individuals who suffer the effects of these crimes but Scotland’s reputation. Although they are called Scottish limited partnerships, Scotland plays no part in them. They are an historical arrangement legislated for in this place.
The Scottish Government’s crime campus at Gartcosh is doing great co-ordination work on tackling economic crime in Scotland, but much of the legislation and company registration responsibility that holds us back is still held here at Westminster. Our good name must not be tarnished any longer by continued inaction on these reserved matters.
SNP amendment 41 would ensure that reasons are given for any company claiming to have no beneficial owner or person with significant control. At the moment, companies do not have to account for that. They can just say, “We don’t have an owner, and we do not know who has significant control.” That is not acceptable, particularly when we consider that Scottish limited partnerships possess a separate legal personality allowing them to own assets, to enter into contracts, to sue or be sued, to own property, to borrow money and to issue certain kinds of security. Typically, limited partnerships are not treated as separate legal personalities and are not able to do those things, but Scottish limited partnerships are uniquely different in that way.
Scottish limited partnerships are taxed as though they do not have a separate legal personality, and no tax is payable by the partnership itself. Instead, the tax authorities look through the partnership structure and tax the partners on their share of partnership income and gains, in line with their profit-sharing ratios. Provided that the partnership is not trading in the UK, however, no UK tax will be payable by non-UK-resident partners.
We have known for years that Scottish limited partnerships are a dodge, and that money has gone in and out without taxation. We know they have been used to launder millions of pounds in dirty money created by illicit business activities. We need to see action finally to put a stop to this.
Unexplained wealth orders have been lauded by the Government in recent weeks as a powerful tool to tackle dirty money, but only nine have been used in four cases since their introduction in 2018. We support improvements to unexplained wealth orders, and we support bringing property held in trust into scope. We hope this will finally allow the National Crime Agency to do more with unexplained wealth orders and make them work.
Tom Keatinge of RUSI explained to the Treasury Committee today that unexplained wealth orders have not survived contact with reality. We can only hope that the reforms will make them more effective and more anchored in reality.
Susan Hawley, the executive director of Spotlight on Corruption, cautioned:
“The focus needs to be on confiscating and seizing assets not just investigating them… Without addressing the serious issues that law enforcement faces from shrinking budgets, decrepit IT systems, to…losing staff to the private sector, the new legislation will not make any difference at all.”
Mr David Davis
I will speak solely to cross-party new clause 29. It is a very simple clause with a simple purpose: to make sure that the sanctions we intend against the oligarchs in Putin’s regime are actually effective.
I remind the House of a previous occasion when we had great fanfare for action against economic crime. Since we introduced unexplained wealth orders some years ago, we have tried to operate the orders only nine times against four individuals, and they have worked only twice. They failed seven out of nine times. The Government are doing something in this Bill to try to improve the equality of arms between Government lawyers and the multimillion-pounds-a-year lawyers on the other side. The Government have done good work that will help, but it does not address, because it cannot address, the most fundamental problem with unexplained wealth orders because, since 1990, it has been almost impossible to get any trustworthy evidential information out of Russia. The very least that does is slow the process leading to sanctions. The process leading to sanctions will be incredibly difficult and incredibly slow even with this better balance.
The Prime Minister and the Foreign Secretary have confirmed that the Government have—this is a tabloid quote, I am afraid—a “hitlist” of more than 100 oligarchs. So far, 11 days into this conflict, we have sanctioned just 17 individuals, with some very obvious and notable exceptions who we can see and hear redisposing their assets even as we sit here. Press reports have quoted Government sources suggesting that it will take six months to work through the rest of the hitlist. And the rest, as I suspect it will take longer.
Dame Angela Eagle
I am a big supporter of the right hon. Gentleman’s new clause. President Zelensky is to address us tomorrow; would it not be good for us to be able to tell him that that new clause was accepted tonight? We would then be able to say that we can crack down much faster.
Mr Davis
It would be good. It would allow us to crack down more effectively; not so much more quickly but more effectively.
What will we see during the months it takes to get people to the legal point at which they are sanctioned? We will see Russians scrambling to sell off their houses, dispose of their businesses and offload their football clubs. In respect of many of the measures, we will know a lot more about it and be much better informed, if none the wiser, with respect to what they are doing. Multimillion-pound car collections will be loaded into jets; anchors will be weighed on superyachts; priceless artworks will be squirrelled away—all to wend their way back to Russia or some other safe haven for these people. By the time our sanctions have taken effect on not all but many of the oligarchs, the horse will have well and truly bolted. Indeed, the background noise is currently the sound of a stampede of horses bolting as the door on the stables creaks shut. That is what we have to put right.
My new clause will help to prevent all that. It will not do everything, because it is only one piece of the repertoire of things we need to do, but it will allow the Government to publish a hitlist—forgive the tabloid term—or a list of individuals who are being considered for sanctions. In the same way as someone may wait on bail before they face trial, the freedoms of those on the list will be restricted for the period so that they do not flee. Once a person’s name appears on the list, their ability to sell, liquidate or transfer out of our jurisdiction their assets—cars, homes, businesses, jets, investments, cash and so on—will be frozen. They will then be unable to sell those assets or move them out of the UK. They will still be able to use them—there will be beneficial advantage to them—but their ability to thwart what we are trying to do today will be restricted.
Given my history in this House, some may be rather surprised that I am willing to see a restriction of a specific human property right—that is what my new clause amounts to and that is quite unusual for me—but we need to take action now; otherwise, any sanctions that the Government seek to impose will be entirely meaningless for a large number of these people. We see Chelsea being sold today and all sorts of actions going on that cannot be helpful to what we are trying to achieve. My new clause would give the Government breathing space—time to go through the legalities of formally sanctioning the oligarchs and pals of Putin who rightly deserve to be the target of sanctions.
Although the Government have identified 100 oligarchs to sanction, other countries have identified more. This is going to be a long war. The sanctions are going to be in place for years, not months. They will have effect only if we move more quickly than the targets.
Mr Davis
Not for the moment; I am just about to finish the point. To move rapidly is the only way to ensure that our sanctions actually hit Putin where it hurts. I will now give way—I have never not given way in my life.
Kevin Hollinrake
I am most grateful. My right hon. Friend’s new clause is very important but, as he would probably concede, a difficulty with it is that we need alongside it transparency in respect of beneficial ownership; otherwise, we will not know who owns the assets. The problem is that the ownership of a lot of the assets is hidden. Does he agree that for his new clause to be truly effective we need a day-one capability to see who owns the assets?
Sir Iain Duncan Smith
I was not going to intervene on my right hon. Friend but I have been looking back over the list in his new clause. Does he think there is a slight problem, in that the new clause talks of
“selling any assets they own or…moving any assets they own or have an interest in out of the United Kingdom, or…moving any of their funds out of the United Kingdom”
but it does not cover anything about gifting assets out to an individual who may then transfer them immediately? Does he think that ought to be included in the measure?
Mr Davis
Yes, my right hon. Friend makes a good point. The reason why gifting and transferring to relatives, which is another category, is not in there is because I took—I almost ripped it out of the legislation—the legislation that we put in place for Skripal, which also omitted those things. My right hon. Friend is quite right, though, and had my new clause been accepted today, I would have looked to make two changes when the Bill went to the Lords, the first of which would be to do that—to tighten it. The other would be to include a right of appeal if it went on too long the other way round, to balance the human rights issue.
We should bear in mind the fact that the National Crime Agency, for example, has people on police bail. I know of a case in which people have been on police bail for five years and we know nothing about it, so the restriction in my new clause on somebody who faces possible sanction is much less than the restriction the NCA imposes on some people. It is vital that we prevent ultra-wealthy individuals, with their teams of highly paid lawyers, advisers and accountants, from exiting the UK with their ill-gotten gains or hiding them where we cannot find them or get them.
By the way, I am a great believer in the presumption of innocence, but if somebody came out of the old Soviet Union—Russia—in the years between 1990 and 2010 with £1 billion, £2 billion, £3 billion or £4 billion to their name, and they were previously an officer of the Russian state, I do not quite start with the presumption of innocence that I would normally start with. I would start with a requirement on them to explain where that came from. That seems to me to be a reasonable, common-sense modification of my normal “mad-libertarian” interests.
Anthony Mangnall
The presumption of innocence must surely be broad and not subjective in respect of any one individual. My right hon. Friend made the point about people on bail; the whole point is that if someone is on bail, a case has already been presented and built up. I of course understand that my right hon. Friend is trying to get to the point at which the case has been built up. On his new clause, how is the process reversed if someone should not be on the list? How would the Foreign Secretary say they are no longer on the list? There is nothing in my right hon. Friend’s new clause that specifies how that would work.
Mr Davis
My hon. Friend is right. If we put the measure in place, there would be a decision at some point as to whether someone was on the list or no longer on the list—“We’ve decided that you’re not subject to sanction.” That clearly has to be part of the operation. By the way, I am afraid police bail does not quite work the way my hon. Friend thinks it does: in the case that I had in mind, there is no case but they have been on police bail. That is just an example to demonstrate that the idea in my new clause is not an unheard of option.
I see Dame Eleanor is looking at me, so let me finish by saying that if we back new clause 29, we will ensure that our sanctions regime will often have real effect. It is proportionate and simple and it would be effective.
Dame Margaret Hodge
I rise to speak specifically to new clause 2, on the funding of enforcement agencies, but I wish to say a couple of things about the amendments in general. First, I am grateful to the Minister for the Government’s spirit and approach in respect of the amendments. We all want the same thing and are attempting to find the most effective wording and mechanism to achieve our shared objectives. I hope the Minister sees the amendments on which there are votes tonight as utterly constructive. I assure him that they really do have cross-party support among Back Benchers in the widest possible sense. A lot of people are behind them and I hope that reassures him that we want to help and are not here to cause him problems.
I am grateful for the concessions that the Government have already made on penalties, on the implementation period, on speeding up sanctions—I very much welcome those new clauses—and on the reporting of unexplained wealth orders, which I have been after for a long time. As I have said to the Minister privately, our amendments include drafting amendments. I am glad he is going to talk to us about amendment 3. He will have heard the general concern throughout the House about whether the wording targets the individuals we wish to target. The other amendments are about strengthening the Bill.
To talk generally, some of the amendments point to the fact that this is not an economic crime Bill. A range of vital issues have to be addressed in a substantial and substantive economic crime Bill. A lot of people have talked about Companies House and tougher regulation; I would include company formation agents in that. We have talked about other enablers and effective enforcement, which is covered in our amendment. My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) raised SLAPPs, and issues in respect of whistleblowers and Scottish limited partnership are also important. That all shows that we do need a comprehensive Bill, but I accept that this is a very important first stage.
Mr John Baron (Basildon and Billericay) (Con)
The right hon. Member knows that I am supporting her amendment tonight, but may I suggest that we need to look innovatively at how we fund these agencies? Perhaps they should be taking a share of successful prosecutions. Initially, we need a big increase in funding for these enforcement agencies to get them off the ground and make them fit for purpose, then we can explore longer-term funding solutions.
Dame Margaret Hodge
It always seems to me absurd that it costs £12 to establish a new company in Companies House. Obviously we want to make it easy for new businesses to enter the market, but £12 is absurd. We know that that gets exploited in relation to shell companies, but does it also facilitate economic crime? If we quadrupled that figure to £50, it would still not be a fortune, but we would then have a massive investment that we could put into our enforcement agencies without raising any further money through taxation. There are a whole range of mechanisms that would not have a direct impact on public spending. They may mean that the Treasury gets a little bit less than it thought it would, but they would not have a direct impact on public expenditure and we could employ them to make these enforcement agencies fit for purpose.
Sir Iain Duncan Smith
I wonder whether the right hon. Lady can see some way forward on a point that I made earlier. Europe, the UK and the USA all have separate sanctioning bodies, with the USA way ahead of the pack. If the USA is sanctioning somebody, it surely should be for this Government, or for that matter for European Governments, to argue why they will not be sanctioning the individual against the evidence that is shared by the USA, rather than why they are looking to sanction the individual here. It seems that, if we are all in this together, it would be far better if we had a much closer set-up, so that we sanctioned people if somebody else had found the evidence and we thought that it was okay.
Dame Margaret Hodge
There are already arrangements for the sharing of information and data, but it is not enough. It is absurd. When I talk to the enforcement agencies and the anti-money laundering people working in the banks, they tell me that they cannot share information. If one bank has information that makes it suspicious about a particular client, it ought to be able to share it around the banking system so that they can all take action. There are pragmatic steps that we could take to share information and knowledge across jurisdictions, from America through to Europe to us, which would massively improve things and actually bring in money.
Let me take one example that came out of the FinCEN files. Standard Chartered Bank is a British bank. In 2019, it was fined by both America and ourselves for poor money laundering controls and other offences, including breaching sanctions in Iran. The British bank was fined £842 million in America, but only £102 million here by the Financial Conduct Authority in the UK. The Americans have got it right. There are lessons that we can learn from them. There are also ways in which we could properly resource all the enforcement agencies. We could perhaps reduce them as well—we do not need all these people. Every time I refer a matter, whether it is for a corrupt or an illegal activity, to one enforcement agency, I am either told that it is the responsibility of another agency or it goes into a big black hole and I never see anything arising out of it again. That situation is completely and totally unacceptable.
Damian Collins (Folkestone and Hythe) (Con)
On this point about information sharing, which is so important, we have an established financial system to do that. Does the right hon. Lady share my concern that many people who are affected by these sanctions may use cryptocurrency both to hide money and to move money, and that many of the cryptocurrency exchanges are saying that they will not take enforcement action against, say, Russian nationals, only against named individuals on the sanctions list?
Dame Margaret Hodge
Cryptocurrency has become the new way in which money is laundered. Corrupt and stolen money ends up in the pockets of one individual, and then gets back into the system for them to spend it elsewhere. I completely agree with the hon. Gentleman: it is important that we get our heads around cryptocurrency and that we legislate appropriately to tackle it.
The other way of looking at this issue, and the reason why we have tabled the new clause, is that our law enforcement bodies, while they are not as good as the Americans’, bring resources back to the UK through fines. Between 2016 and 2021, the law enforcement bodies brought £3.9 billion back into the UK coffers. If that money had been reinvested, which is one of the ideas for funding the enforcement agencies, it could have brought an extra three quarters of a billion pounds to be spent on enforcement by all those agencies. That is a lot of money, and it would have been effective; it would have had a snowball effect of increasing our budget.
New clause 2 is there to ensure that we get the enforcement right—that we have not only the powers but the resources we need to make sense of and put into effect the important legislation we are passing today. I hope it will have support right across the Committee; it certainly has support among Back Benchers, and I would love it if the Government accepted it and it became part of the Bill.
The Chairman of Ways and Means (Dame Eleanor Laing)
We have a great many amendments to consider this evening, and it would not be right if the people who tabled those amendments did not have the chance to speak to them so that the Committee can be helped to make its decisions on them, so I must appeal for shorter speeches now. I am not complaining, because so far we have had substantial speeches about substantial amendments, but will Members who are supporting amendments rather than speaking to their own amendments please consider making shorter speeches?
Kevin Hollinrake
It is a real pleasure to speak after the right hon. Member for Barking (Dame Margaret Hodge). We have worked together on so much, and we have worked on this legislation for a long time.
I will talk about new clause 2 when I come to my comments on whistleblowers, but the main thing I want to talk about is amendment 64. Many hon. Members have spoken about the danger of asset flight. In reality, we know it is happening already; people are not going to wait for this legislation to come into effect to try to hide their money. Whether the transition period is 18 months, six months or 28 days does not really matter, because the individuals in question can move their money around so quickly that much of it will have happened already.
I have supported amendment 16 in the name of the official Opposition, but I would like to think that my manuscript amendment 64, which I am very grateful to Mr Speaker and the Deputy Speakers for selecting, might be more effective. There are some other important amendments that have been tabled, such as new clauses 28 and 29, on freezing orders, but the difficulty with those new clause, as I said in my earlier intervention, is that we cannot freeze something that we do not know exists. That is very difficult to do. We need to look behind the curtain at who owns the assets. That is obviously what this Bill does; it is primarily about transparency and being able to see who owns what.
I am grateful for the support of many people on manuscript amendment 64, including my hon. Friend—he should be right honourable—the Member for Weston-super-Mare (John Penrose), the Government’s anti-corruption champion. We have worked closely on this, and as soon as we looked at the Bill we thought, “There’s something missing here. Clearly, these people are going to move this money around very quickly to make sure it’s not touched.”
I think this amendment probably does something, although I am not a lawyer—I looked at this over the weekend and I did not have any legal input, so I cannot say it is totally fit for purpose and I am interested to hear what the Minister has to say about it. He has engaged on this issue all the way through and been willing to discuss with me, as we did yesterday, what we can do to close this potential loophole. The amendment would simply require beneficial ownership to be registered with Companies House, which links into the Land Registry’s requirement to ensure that something is properly registered with Companies House before it allows a transfer or a sale to happen. Without the Land Registry doing that, of course, people cannot sell or transfer a piece of land or property.
Lloyd Russell-Moyle
The hon. Gentleman is making a very good speech on the importance of that relationship between the Land Registry and Companies House. Does he agree that the requirement still to pay to access the Land Registry dims the light that is shone, rather than enhancing it, and that making it an open registry, with Companies House as an open registry as well, would aid the process of light-shining?
Kevin Hollinrake
That is what it will do. It is a public register, of course, so the beneficial owner will be revealed and, if that person is on the sanctioned list, that asset can be frozen. That is how it would work. In the legislation, schedule 3 paragraph 6 requires the Land Registry to do that, and it can prohibit or restrict a transfer or a sale. That is the key to this. The only respect in which the legislation is not currently fit for purpose, in my view, is that that does not take effect for 18 months. If we took those clauses out or changed the timescales so that it came into immediate effect on the commencement date of the legislation—that is, from day one—it would potentially prevent that sale or transfer of assets from one person or entity to another and the moving of those assets around, and thus prevent what we are all concerned about—asset flight.
I know the Minister has responded to this question a couple of times from the Dispatch Box, but I think there is a good chance this particular amendment would pass if pushed to a vote. I would appreciate confirmation from the Minister at the Dispatch Box whether the Government will, as he has indicated they would, table an amendment in the Lords that has a similar effect, so that we have a day one restriction or prohibition on the sale or transfer of assets from one to another. If he is willing to do that—[Hon. Members: “Do it now!”]
The Chairman of Ways and Means (Dame Eleanor Laing)
Order. We are not having this—we are getting on with things. Otherwise, people who have something to say will not get a chance to say it. Mr Hollinrake, come on!
Kevin Hollinrake
I was just trying to establish whether this would be done in the Lords if it was not done here tonight, Dame Eleanor. Perhaps the Minister will say it later in his summing-up.
Kevin Hollinrake
He is nodding—thank you very much. Hansard have got it on record that he is nodding. That is very important.
I want to mention one other important thing that is often missed. Many hon. Members in all parts of the House have talked about resources, and they are absolutely right. New clauses 2 and 9 deal with that. There are nowhere near enough resources applied to economic crime: it represents 40% of all crime, but 1% of the resources. For example, last year I think the Office of Financial Sanctions Implementation, one of the bodies charged with enforcement, sanctioned two individuals or companies with collective fines of £85,000. In the US, a similar body levied 87 fines totalling £1.5 billion, because it is properly resourced. That is hugely important.
New clauses 14 and 27 seek to approach the problem in a different way, because they would provide protection for whistleblowers. It is pointless having lots of law enforcement people charging around not knowing where to look. Whistleblowers tell us where to look. Some 43% of all financial crimes are identified through whistleblowers, yet it is something we do not talk about. We do not just need more regulators; we need somebody to point us in the right direction. Regulators will always be watchdogs, never bloodhounds. We need the bloodhounds in the organisations who are willing to speak up if things are going wrong.
Every single economic crime I have dealt with in my work on the banking side of things has come to light as the result of information provided by whistleblowers. On GPT Special Project Management, it was my own constituent Ian Foxley. Airbus paid $3 billion in fines internationally and £900 million to the UK Treasury, and all that money came as a result of a disclosure from whistleblowers. In every single case you can think of, whether HBOS or the PPI scandal, they were all about whistleblowers. Yet the protection and compensation that we offer whistleblowers in the UK is pretty much non-existent. In the case of Lloyds/HBOS, the FCA itself was guilty of not protecting the whistleblower. Barclays tried to identify the whistleblower in a case within Barclays. Yet very little or nothing is done. So if you are thinking of blowing the whistle, will you do it? My constituent, Ian Foxley, who was involved in the GPT Special Projects case that resulted in £28 million of financial sanctions at Southwark court last year, has been 11 years without a single penny. That man was earning £200,000 a year. Do you think he would step forward next time, or somebody else would do the same? We have to make sure that we protect whistleblowers.
Philip Dunne (Ludlow) (Con)
My hon. Friend—by the way, I support enormously what he has been saying about the banking frauds—is making a very important point in relation to whistleblowers in a domestic context. In this context, we are talking about sanctions against people who potentially undermine the law of this country, as we saw in Salisbury, by taking action into their own hands against whistleblowers—trying to take them out. It is entirely appropriate to defend the personal safety of people who undertake whistleblowing.
Kevin Hollinrake
I am grateful for my right hon. Friend’s support.
I will press new clauses 14 and 27 to a vote. It is very important that this is included in part 2 of the Bill. We need modernised legislation, an office for the whistleblower, to provide protection, and a compensation regime so that these people are fairly compensated for bringing forward information that leads to prosecution of these crimes. That will lead to resources for the National Crime Agency, the Serious Fraud Office and others. One thing will lead to another. The US Securities and Exchange Commission, which is hugely successful in imposing fines on financial organisations, was a relatively small organisation before the US’s whistleblower legislation came into effect. That is one for later, but now, in this Bill, the change has to be made through amendment 64 or something similar. I would really appreciate the Minister’s confirmation that we will do that in the Lords as the Bill progresses.
Stella Creasy
We are all acutely aware of just how important this Bill is. In less than 24 hours, this House will be addressed by President Zelensky, and we all want to be able to look him in the eye knowing that we have done everything we possibly can to help him and his people, and knowing how urgent the situation is—that we are days if not hours away from further atrocities in Kyiv, let alone across the country.
It is in that spirit of the urgency of getting this legislation right and making it as powerful as it can be that many of us have tabled amendments, many of which are cross-party. Sadly, my next-door neighbour, the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), is not in his place. I want to follow up on the conversation about “carelessly or recklessly” by talking about the amendments I have tabled that try to learn from tax legislation. I hope the Minister will take that spirit forward, as he has made the commitment that he is going to bring forward further amendments on this in the other place to look at what we can learn from tax legislation. The difficult truth for all of us, as all these speeches are highlighting, is that if these amendments do not go into the Bill, many of us feel that the legislation will be toothless, and that brings the shame that means that we cannot look President Zelensky in the eye.
I particularly want to draw the Minister’s attention to amendments 29, 30, 34 and 31, which are about what we might do instead of having the omission of “carelessly or recklessly”. However, I support the new clause tabled to remove those three words. The amendments recognise what all of us recognise in our day jobs: the difference between tax avoidance and tax evasion; between people acting deliberately and people acting carelessly. Our constituents understand all too well—I am sure we see many cases of this in our casework—that if they have acted carelessly they still face penalties under the law just as if they have acted recklessly. But right now this Bill does not apply the same test to the oligarchs that we are trying to challenge. It does not recognise where somebody may have acted carelessly—although many of us might think that carelessness does not come into it when you are paying that amount of money to the enablers that we are talking about—and might be able to say it was a mistake that they had not declared who the person of significant control would be and who the beneficiaries are. It is clearly a breach of the rules when that happens, but as the Bill currently stands, many, when they are challenged, would no doubt say that it was just an unfortunate accident, what a pity it was and they would put it right. If our constituents cannot get away with that excuse with regard to their tax returns, then certainly an oligarch should not be able to get away with it. We should make sure that we show that we are not just focused on those excuses but that we care about those excuses.
Since 2016, the Government have made it compulsory for anyone setting up a company to name the individual who actually controls it—the PSC, or person with significant control—but nobody checks the accuracy of the information. As we have said, we could pretty much register companies in everybody else’s names in the Chamber and nobody could claim that that was impossible to do. Someone might claim that it was a mistake, but if they are an oligarch, how do we make sure that that person does not do that? The amendments I have tabled also address the nature of the penalty. We have not really talked about that. It is welcome that the Government have increased the penalties, but I still fear that we are talking about people for whom billions of pounds are the standard currency that they are dealing with. Amendment 31 refers to the market value of the properties at stake and the market value of the properties that are not registered. Subsequent amendments recognise the difference between carelessness and recklessness so that if somebody has accidently not registered a company, the penalty they might face would be lower than if they had deliberately not done it.
All this only works if we also bring in the other part of civil law, which is the balance of probabilities, because, again, our constituents do not get the benefit of the doubt but right now, under the Bill, oligarchs would. The amendments bring in the balance of probabilities to give the law enforcement agencies—I completely support those who are calling for additional resources for them—the ability to go after people on the balance of probabilities: not to have to hope that they have the evidence but to recognise the same test and threshold that we set in civil law with regard to our tax returns. For minor errors such as submitting a late return, there is usually a fixed penalty of a few hundred pounds, but if a tax return is intentionally wrong, or there has been a lack of reasonable care, HMRC levies penalties as a percentage of the tax due—up to 30% for carelessness and up to 70% for deliberate inaccuracy. The Government warn:
“Penalties can apply if your client does not tell HMRC if an assessment is too low. This type of penalty is known as an ‘inaccuracy penalty’ and applies to…taxes and duties”.
I hope the Minister can understand that point and why, with regard to deleting “carelessly or recklessly” we might also want to be clear about where people act with intent and where they act as though they do not care because frankly they have so much money that this is just an occupational surcharge that they may take on. Other amendments that I have tabled reflect that differential. I have also tabled amendment 34 to recognise where an adviser is part of that, because many of us are concerned about those who enable oligarchs to get away with this but would perhaps live in the land of the accidental omission rather than deliberate, reckless omission.
The other amendments I want to flag up to the Minister are about some of the other loopholes. Many of us have spoken about our fear that assets will be taken abroad, taken away or hidden, and particularly the idea that people will hide them among their family members. If we were in a proper Committee, I would say that amendment 39 was a probing amendment to see where the Government are going on this. It talks about connected parties. It is about recognising that there is a history among these people of registering and hiding assets not just in shell companies but in the names of their family members. Two years ago, the anti-corruption campaign group Global Witness looked at this and found that 4,000 of the people registered as a person of significant control were under the age of two, while one had not even been born yet. At the opposite end of the spectrum, its researchers found that five individuals each controlled more than 6,000 companies. There are more than 4 million companies registered at Companies House. That is a very large haystack in which to hide needles. If those needles happen to be connected to an individual, we should be able to track that fact and acknowledge it through this legislation. According to The New York Post, the former owner of Chelsea football club transferred £92 million of New York City property to his ex-wife, Dasha Zhukova, just before the 2018 round of sanctions was announced. Those sanctions were designed to affect people close to Putin and
“to counter and deter malign Russian activities”
that were harming democracy around the globe.
Our counterparts in America have already sanctioned family members alongside oligarchs. The American Treasury announced that Nikolay Petrovich Tokarev, the president of Transneft, has been sanctioned, but so too has his daughter Maiya and his wife Galina. Maiya’s real estate empire covers more than £50 million-worth of property in Moscow alone and includes at least three companies, including Katina, which owns prime oceanfront real estate in Croatia. The EU and Canada have also sanctioned this family, and Canada has also designated Galina and Maiya, but as far as I can see, we have not yet sanctioned a single family member. Amendment 39 would make sure we have information about those connected parties. It is not perfect, but I hope that in his response, the Minister will explain how the Government intend to ensure we can avoid oligarchs hiding money not just in shell companies, but with shell relatives.
As part of that effort, I put on record my support for new clauses 29 and 2, which deal with resources and asset freezing. This is not just about bolting the stable door; it is about the people who are now running for their lives. We in this place have ruled out military intervention, as has NATO, because we have rested our hopes on economic sanctions as the way to bring Putin to a halt and stop what he is doing. We have to get this right, because there are people sat in Calais tonight, looking to this Government who have failed to give them a visa. There are people sat in Kyiv tonight, waiting for the air raid sirens to go off, who are asking what we are doing. This legislation is what we are doing, so if we do not make sure it is watertight, we are giving a green light to Putin to carry on. Nobody in this House wants to do that.
Dr Kieran Mullan (Crewe and Nantwich) (Con)
I rise to speak in support of amendment 64. Economic crime is an issue that should always have the attention and concern of this House. It is theft on a grand scale, and often supports criminal networks and enterprises that are guilty of a much wider range of crimes, including violence, trafficking, drug dealing and all manner of actions that leave a trail of human suffering. These crimes may be committed in far-away places or have been committed in the distant past, which may go some way to explain why, to date, tackling this problem globally has not had the support it needs. However, we are considering this Bill in a changed world, where the human consequences of one major source of this kind of activity are plain for everyone to see.
Putin’s corrupt, criminal regime is waging war on the innocent population of Ukraine with absolute barbarity, almost certainly committing numerous war crimes. We have all seen the horrendous images of families lying dead on the street, shelled as they tried to flee during what was supposed to be a ceasefire. We have all seen the reckless assault on nuclear facilities and the apparent use of cluster bombs and indiscriminate weaponry in civilian areas, but we have also all seen the incredible bravery and patriotism of the Ukrainian people, with hundreds of thousands of volunteers from all walks of life picking up arms and fighting and dying for their country.
We can be proud of what we have done to help these people. We were the first country to supply lethal arms to them; we have trained more than 20,000 of their soldiers; and we joined the United States in doing our absolute best to warn the world about what was going to happen, often in the face of strong criticism. While these people are fighting for themselves and their country, they are also fighting for us. They are on the frontline of a battle that will decide whether the world order that has kept us safe for decades is upended. I understand why getting directly involved in this conflict could lead to much wider suffering and conflict, but because we are letting others fight and die on our behalf, it is incumbent on us to do everything else we possibly can to help them.
I want to challenge the impression that people who have heard today’s debates in the House and listened to the media may have received: that somehow, London and the UK have been uniquely susceptible to the finance that has been flowing from the Putin regime. This issue predates Putin. The transfer of the wealth of the Russian people to private individuals took place in the 1990s. That was the source of all this money, and every company, Government and individual that has had dealings with Russia since then has been tainted by it.
I am afraid there is plenty of blame to go around. It was the Labour party that introduced the tier 1 visa, which seems to have been one of the ways in which this country has been exploited. I remind Members that the Prime Minister at the time, Tony Blair, said at an EU-Russia investment conference he chaired that increasing reliance on Russian oil and gas was not something to be concerned about. A number of former Labour Prime Ministers and Members of the Lords have received handsome fees for speaking at Russian investment summits. Furthermore, Labour and Liberal Democrat Members argued against some parts of the original legislation in 2018 as too enabling of Ministers, with the shadow spokesperson saying that it contained excessive powers and was
“not justified by the need for speed”.—[Official Report, 1 May 2018; Vol. 640, c. 239.]
These oligarchs’ property empires are spread around the world, in Paris, New York, the French riviera and Berlin. If Members look at the media, they will see politicians from most of those capital cities identifying that they have been too lax on this issue for many years. Representatives of America’s justice system suggest that billions of pounds-worth of properties are hidden in New York limited liability companies.
As a financial centre of global importance and a high-value property market, it is not surprising that London seems to be a focal point for these oligarchs and their stolen wealth. While I accept things should have happened sooner, I question whether the world would have acted in the same way with us. There would be little point in cracking down on shell property ownership in London if all of it just fled to New York, Berlin and other capitals, so I caution against some of the self-righteousness we have heard from the Opposition.
The whole of the west has been too slow to act, and we can see we are all paying a price for that now. Every time we dealt with this regime’s puppets, we strengthened Putin. Every time Europe allowed its energy dependency to grow, we strengthened Putin. Whether it was behind closed doors, or in plain sight when they proceeded with the plans for Nord Stream 2, we know that ultimately that money and those projects date back to a corrupt, criminal regime that stole its funding from the Russian people.
In the end, authoritarian regimes get worse and worse—they always do. They are especially likely to do so in modern times, now that we have a modern surveillance state that makes it very difficult for the people to challenge or dislodge the regime. I welcome this Bill, and I welcome the spirit of the House generally in getting this legislation pushed through, even if at times I feel that people have been using it to make party political points.
I welcome the explanations we had from the Minister on Second Reading about a further Bill being drafted to tackle some of the wider issues, such as false declarations. It is right that we are focusing on the priority we have now, but that is a wider and bigger bit of work. I also draw Ministers’ attention to the challenge our enforcement agencies will have, and we must do more to help them. They can expect challenge in the courts. As others have said, the National Crime Agency and the Serious Fraud Office often face an onslaught of uneven legal competition whenever they proceed with any cases, and we can expect agencies such as Companies House to face the same. They can expect those supplying them with information to face legal attacks through the misuse of data protection laws.
We had a debate in this place on lawfare a few weeks ago that discussed strategic lawsuits against public participation, known as SLAPP. Those lawsuits go after not just journalists, but the kind of investigative companies that might help us tackle the huge task of proving who owns what. If we were already considering anti-SLAPP legislation, surely we need to put a rocket under that exercise to see whether there is more we can do. I know that the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) has tabled some amendments in that regard.
Capital flight is a key issue, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has described, and I welcome the commitments that have been given at the Dispatch Box to ensure that the action we take is not too late, but there have been suggestions that we either shorten the time for registration or, as amendment 64 would do, put in place day one restrictions when it comes to the sale or transfer of assets during this transition period. The latter suggestion seems more proportionate and achievable, and I welcome the commitment from the Minister on delivering that.
I accept there may be challenges for Companies House and the Treasury in delivering on ambitious and wide-ranging changes to our approach. I understand that, and I do not say this lightly, but when it comes to making the commitments we should make to deliver on this, the resources we put into this task as a Government should reflect the seriousness of what is happening in Ukraine, with Putin determined to upend the global order. As the Prime Minister has said, we must do everything we can to ensure he fails. If we are asking the Ukrainians to fight and die for their democracy, and if the west has to answer for its role in failing to take action against the Putin regime for many, many years, it is the least we can do.
Chris Bryant (Rhondda) (Lab)
I am afraid I thought that was an utterly shabby little speech.
Chris Bryant
The hon. Member has only just spoken, so no, I am not going to give way. I think that speech was shabby, because it was partisan and completely inaccurate. Actually, many of us across the House were arguing for a very long time—all the way from 2010—for a proper sanctioning regime in this country. I think I personally asked different Prime Ministers 32 times for Magnitsky sanctions, and I was delighted when the Government introduced that legislation in 2018. I worked closely with the right hon. Member for Esher and Walton (Dominic Raab) to try to secure that, and I was delighted when he became the Justice Secretary, because I know he cares about this issue, and I have worked with him on it for many, many years.
Some of us argued for many, many years that it was wrong to have tier 1 visas doled out to people from authoritarian regimes around the world, including China and Russia, without asking any proper questions about where the money had come from that they supposedly had to invest in the UK. The levels were £2 million and £10 million. If someone had £10 million, they could get their permanent right to remain in the UK fast-tracked, and they could end up with UK citizenship. I think that has led to greater corruption of the British state, so it is absolutely disgraceful that an hon. Member should come to the House today and try to blame the Opposition for not introducing legislation when we were not in Government.
Chris Bryant
No, I will not give way to the hon. Gentleman. I remind him what happened on 1 May 2018 when we debated the remaining stages of the Sanctions and Anti-Money Laundering Act 2018. We voted on whether to introduce—guess what?—an economic crime Bill to bring forward a public register of the ownership of properties. Conservative Members all voted against that and the Opposition voted in favour, so I will not take any lectures from him on that.
I care passionately about the issue because we are facing an absolutely critical moment. None of us elected as MPs in this generation thought that we would see the elected Mayor of a town gunned down by Russian mercenaries when giving out aid in a democratic society, as Yuri Prylypko, Mayor of Hostomel, was today; none of us thought that we would see the Russian Government bombing refugees when there was meant to be a ceasefire; and none of us thought that we would see ceasefires repeatedly ignored day after day, so timeliness is all today. This is not really emergency legislation—it is just long overdue—but it is timely and important. In fact, I suggest that the amendments that the Government have tabled are more important than the material in the original Bill.
What depresses me is how many Putin-related Russian oligarchs and people with large assets in the UK have still yet to condemn the invasion of Ukraine. It is an absolutely deafening silence. It shames all of us that we have sanctioned only 11 oligarchs so far, or perhaps 17 individuals—there are different ways of counting it; it depends who we count as an oligarch—whereas the United States of America and the European Union have done far more.
In the Foreign Affairs Committee this afternoon, the Foreign Secretary tried to blame me for not having done enough. It was all my fault because apparently I had said something that she had to subsequently retract because it turned out that that was not true and I had not said it at all. She has apologised. The point is that everything that we are doing today should have been done in 2018, so we are genuinely frustrated.
We are seeking transparency about who owns what. The Bill does a substantial amount of that, of course, but we also want that to be enforced. There is a major problem that Companies House cannot even question whether the information that it has been provided with is accurate. If someone looks up a director on the Companies House website, it says that it cannot verify whether the information is correct. We want to go that step further and it seems bizarre not to include that in the Bill, which is why there are amendments about that.
We want individuals to be sanctioned. The measure that the Minister has introduced has gone some considerable way to making that easier, but I still do not understand why we made it so difficult in the first place. We also want the seizure of assets. There is not much point in sanctioning people if it will not have any effect. That is also extremely timely and must happen rapidly because of all the things that we have said about asset flight.
My anxiety is that without new clause 29 we are not doing that last part at all. My guess is that if we have to wait for the Government to introduce further legislation, that will not happen until after the Queen’s Speech sometime in May, so it will not go through both Houses for another six months. If we leave things that long, we will do exactly what we did in 2014 over Crimea: the moment will have passed and we will forget. Our memories will be short, another issue will come along and Putin will have won.
That is why I have tabled four simple amendments. Amendments 24 and 25 say that when someone registers or updates the register of beneficial ownership, they simply have to say whether any of the individuals that they are referring to are sanctioned individuals. That is important because it means that the people who are doing the registering have to check whether they are sanctioned individuals. We might think that they would want to do that anyway, but forcing them to do it means that, when they then register incorrectly, they are committing the offence, rather than the sanctioned individual. That is why that is important.
Sir Robert Neill (Bromley and Chislehurst) (Con)
I am afraid that I am now going to reduce the level of excitement by returning to some rather technical and boring but I think important legal details of the Bill, because we all want to make sure that this works in practice. I am concerned that, despite what is in the Bill itself and in a number of the amendments, there still seem to be two important areas of potential loophole.
Can I start with the definition of registrable beneficial owner, largely in schedule 2? The concern that I have, and I am fortified by the briefing I have received from the Law Society of England and Wales—it mirrors the briefing that I suspect the hon. Member for Glasgow Central (Alison Thewliss) had from the Law Society of Scotland—is that there is a gap here, as the impact assessment of the Bill sets out. What has been done here is to take the existing domestic registry of persons of significant control and seek to build on that, which is fair enough, but it does not go far enough.
The problem that we have is this. There is a common misconception that analysing who the person of significant control of an entity is, is the same as analysing who the beneficial owner is. They are not the same and the objective we need to get to is: who is the economic beneficiary?
The position is this. The PSC regime seeks to establish ownership certainly, but only ownership in the context of leading to the control of the relevant entity. It does not seek to establish who the ultimate economic beneficiary of that entity is. So we could have a situation where the register disclosed the ownership of, let us say, a corporate group, but it would not then disclose who in fact are the people behind the corporate group. It might disclose individual named nominees, but it would not then disclose the people on whose behalf the nominees hold the property. There might in fact be no registrable person—no legal entity that holds significant control—so nobody would be shown up in that.
I urge the Minister to pay attention to what the Law Society suggests to get around that and to ensure the economic beneficiaries of the property are captured—the oligarchs and their families; they are the economic beneficiaries we want to get to. The trust and its beneficiaries—this will invariably be in the form of trusts of one kind or another—should also be registrable under regulation 45 or 45ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. That is a mouthful, but it would do the job. The whole point is that then we would be able to capture the beneficiaries. That is missing from the Bill as it stands and I do not think any of the current amendments deal with that point. I hope the Minister, as he is taking things away, will take that away urgently in order to plug the loophole.
That relates to the relationship between the scheme under this Bill and the scheme of the trust registration service because that same set of 2017 money laundering regulations works in conjunction with the trust registration service: that is the body through which entities meet their legal obligation to register under those money laundering regulations. Express trusts are covered by that if they are UK trusts. Non-UK express trusts are obliged to register under the 2017 regulations if they hold UK property, or derive income from a UK asset—again, that is the sort of situation of the oligarchs that we are looking at.
We must be very clear in setting out which overseas trusts are going to be caught by the legislation. Are they under the regulations or under the Bill? If we extend the definition across, we might well cover that. It is also suggested—I think there is merit in this—that guidance should be issued to honest practitioners in this field setting out which entities are in scope of the scheme and which are out of scope. That has happened in other forms of tax legislation and will be a sensible idea to take away.
The final point I make in relation to that guidance is that that would enable the Secretary of State to give better indication as to interpreting the meaning of “significant influence or control” within legislation. We have got who the beneficial owner is, capturing the economic beneficiaries, and who the person of “significant influence or control” is. We ought to make tally with the PSC regime as far as we possibly can. The logical way to do that is by introducing an amendment to introduce the same provisions we are introducing here into section 790C(7) —I am sorry, again, about the length—of the Companies Act 2006. That would enable us to bring in the equivalent PSC regimes for limited liability partnerships —again there is a gap here, as I read it—unregistered companies, and also Scottish partnerships, which have been referred to by Opposition Members.
Those are gaps that the Law Society has flagged up that could be plugged. There is plenty of time between now and next week to get that worked out. I just say this: the Government have many able lawyers—I worked with some of them when I was a Minister. Specialism in detailed trust law is not necessarily a core Government legal business. The Law Society, both north and south of the border, has access to real expertise in this field, objectively. It has written to say that it would be very happy to work with the Government in helping to fine-tune the legislation. I hope the Government will think about that. Not all wisdom purely comes from within Whitehall and we ought to look to experience in the sector to take that on board.
I hope those suggestions will improve a Bill that is well intended, but we want to nail everything down as much as we can. In that spirit, I hope the Minister will consider them.
Layla Moran
I rise to speak to the amendments in my name: new clause 5 and, in particular, amendment 4, which is supported by the cross-party group that has been trying to get our ducks in a row. The Bill is welcome and timely. It is long overdue and we are all trying to pull in the same direction, but it is a bit of a Swiss cheese Bill. Much in the Bill is good, but there are a lot of loopholes, which we are seeking to close.
I will single out new clause 29 in the name of the right hon. Member for Haltemprice and Howden (Mr Davis) and the amendments relating to clause 31 that were tabled by the hon. Member for Rhondda (Chris Bryant). I heard what the Minister said about “Economic Crime Bill 2”. It sounds like the promise of the good sequel after the film—it is coming and it will be even bigger and better, with bigger stars than the first one—but we all know how sometimes part 2 can be a flop. I sincerely hope that part 2 will come sooner. I remember when the Minister was on his feet claiming that this Bill would wait until the next Session, and here we are debating it now. I welcome that. I wonder whether we might want to try to do that with part 2 and part 3 and get the sequels out as quickly as possible because each one will be pretty meaty and need time.
New clause 5 asks the Government to release the names of those who in the last year have been lobbying the Government against these measures. That is important because it helps on the SLAPPs amendments, which I wholly support. These people need to now be named and shamed. It is not enough to name the oligarchs; we need to name the PR companies and the lawyers—those who seek to water down or create loopholes in this legislation. I tabled a parliamentary question to the Foreign, Commonwealth and Development Office—it was passed to the Home Office—asking it to provide and publish the names of those who had been doing that. The answer was:
“The information requested could not be obtained without disproportionate cost.”
Forget about the cost—do the Government have the list? If they do, those people deserve to be named and shamed, like in the speech by the hon. Member for Isle of Wight (Bob Seely) the other day. I hope that “Economic Crime Bill 2” will have all the necessary powers to clamp down on that activity.
Amendment 4, like amendment 26, looks small. It is very small; it just deletes a line in clause 18. It relates to the bit of the Bill that talks about exemptions. There are three ways in which an individual can become exempt if the Secretary of State wants them to be. Two of them are reasonable. They are
“in the interests of national security”
and
“for the purposes of preventing or detecting serious crime.”
Absolutely fine. Some people think we should just get rid of them all, but I can live with those. However, the third, in clause 18(1)(b), says that the Government can exempt an individual if satisfied that it is necessary to do so
“in the interests of the economic wellbeing of the United Kingdom”.
These are high net worth individuals. Many of them own companies that potentially employ thousands of people in this country. I do not understand why the Government want to give themselves that headache. Why do they want these enabling lawyers to look at clause 18(1)(b) and say, “I’m going to lobby Government to exempt me under 18(1)(b)”?
It is not just a loophole. People keep talking about horses bolting after the gates have been closed. This is hitching a coach to the horse, putting the oligarchs in it with their lawyers and allowing them to drive their way through the Bill. It makes no sense at sall.
Sarah Olney (Richmond Park) (LD)
My hon. Friend is making an excellent speech. On the point about horses bolting, I want to mention my new clause 13 on freeports. That issue has come up a number of times in the past few weeks. We have been talking about the National Insurance Contributions Bill, which is the enabling Bill for freeports. It is really important that we include the list of companies that are in freeports; I made that point in the debate on that Bill last week. Currently, someone can hide the fact that they are using a freeport, and there is so much concern that this is an open invitation for money laundering in the UK. While we are still discussing this Bill, before it is passed and before this particular horse has bolted, will the Minister reconsider supporting the amendment that the Lib Dems tabled in the Lords to that particular piece of legislation—
The Chairman of Ways and Means (Dame Eleanor Laing)
Order. That was a very long intervention and it was too confusing. Was the hon. Lady speaking about something completely different from that which the hon. Member for Oxford West and Abingdon (Layla Moran) was discussing?
The Chairman
It is not the hon. Lady’s new clause; it is down as the Liberal Democrats’ new clause. Is it the official Liberal Democrat—
Sarah Olney
I beg your pardon, Dame Eleanor. The new clause is in my name, but I apologise for taking too long on my intervention.
The Chairman
We have to be careful not to allow things to be confused at Committee stage. Everyone gets their turn.
Layla Moran
Thank you, Madam Deputy Speaker. I thank my hon. Friend for her intervention. When the Secretary of State for Business, Energy and Industrial Strategy was at the Dispatch Box, he said that he would look closely at that amendment—it was the day before the vote on the National Insurance Contributions Bill—and I urge the Minister to look at that again.
Sir Robert Buckland
I have been listening carefully to the hon. Lady’s speech, and she is making an understandable point. My recollection about the phrase “economic wellbeing” is that it appears, for example, as an exemption to the right to privacy in article 8(2) in the European convention on human rights. What we should be looking for is provisions that match the rights acquired under article 1 of the first protocol—namely, rights to property—and clearly, there need to be qualifications on that in circumstances such as these. She is right to probe the Government so that we get language that mirrors, at the very least, convention rights. Does she not agree with that reasonable proposition?
Layla Moran
I thank the right hon. and learned Gentleman for his helpful intervention. I would rather that we deleted these lines now—they cause a lot of problems—and then, when the Bill goes to the Lords, he should by all means have a conversation with the Minister and perhaps it can be tidied up there. My concern is that if this stays in the Bill now, we then end up with too much to do in the Lords. So much is being put off and is waiting for the Lords to have a look at it that we may never get to these things. It is such a small thing, but its impact is huge.
We all want the same thing. Let us not get the enablers to start betting on clause 18(1)(b). Amendment 4 is very simple—it would delete this now. We might have to tidy a few things up in the Lords, but I would be really grateful if the Minister specifically addressed how he will ensure that clause 18(1)(b) does not end up ruining what is otherwise a good Bill that has been made much better by all the amendments that have been tabled, including by the Government.
Liam Byrne
Thank you for calling me to speak, Dame Eleanor. I thank the Minister for his presentation to the House and for the spirit that I thought he brought to his remarks at the outset. He slightly walked back from some of that consensus, but I make the point to him that many of us across the House think that the Government’s approach to tackling economic crime is all holes and no net. We have tried, in 27 pages of amendments, to turn what should be a net into some snares. That is why we cannot understand why the Government are not taking on board some of the smaller, technical drafting amendments that we proposed tonight—and frankly, some of the bigger moves. The Minister has it in his power to drive those through tonight so that by the time the sun rises tomorrow, we would have in our country a much stronger framework for tackling economic crime to take to the other place.
I want to speak to the two amendments in my name—amendments 37 and 38—and weigh in on the debate on amendment 26 and new clauses 2 and 29. Let me start with amendment 26, because I was a Home Office Minister for a couple of years, and I have won and lost many cases as a Home Office Minister. I have to say to the Minister that the failure to remove the words “knowingly or recklessly” from the Bill is frankly the oligarchs’ loophole—their “Get out of trouble free” card. I add my plea to those of other hon. Members that we remove those words. Otherwise, frankly, we will stand by and watch the richest people on earth driving a coach and horses through our legislation.
My second point is about new clause 2. As my right hon. Friend the Member for Barking (Dame Margaret Hodge) said, the heart of our problem with sanctioning—our frankly embarrassing performance on it—is that as well as not having the right powers, we just do not have the right resources in place. The fact that the Government took away the title of Minister for Economic Crime tells us everything we need to know about their performance and attitude hitherto.
As my hon. Friend the Member for Rhondda (Chris Bryant) said, the United Kingdom has sanctioned 34 individuals and entities since the extension of the invasion; the EU has sanctioned more than 500. Of the Navalny list of 35 that the hon. Member for Oxford West and Abingdon (Layla Moran) read out in the House the week before last, the UK has sanctioned just eight; the EU has sanctioned 19. However, what really troubles me is the question of resources, because that is obviously the core problem.
When I submitted parliamentary questions to the Foreign Office, the Treasury and the Home Office last week, I was frankly horrified. My question to the Foreign Office, which leads on sanctioning policy, was pretty straightforward: how much money is devoted to sanctioning, and how many civil servants are working on it? The answer from the Under-Secretary of State, the hon. Member for Chelmsford (Vicky Ford), was about 16 lines long and did not mention either how many civil servants are working on sanctioning or how much money is being spent.
An answer to the same question came back from the Minister for Security and Borders. In a way, I admire the number of tropes folded into his answer:
“The National Crime Agency welcomes the announcement on the Combatting Kleptocracy Cell…They have already surged additional officers to support existing efforts and will”—
wait for it—
“move at pace to enhance the unit further”.
I put the same question to the Treasury. The Treasury being the Treasury, it said:
“The staff in post in OFSI was 37.8 FTE…This information can be found in HM Treasury’s Outcome Delivery Plan”.
That is the level of precision that we ask of every Department. Frankly, the silence tells us that all is not well. That is why new clause 2 is so very important.
New clause 29, tabled by the right hon. Member for Haltemprice and Howden (Mr Davis), is incredibly important, but I push the Minister to go further. We need to be able not only to freeze assets, but to seize them. Paragraph 3.1.3 of the UK financial sanctions guidance in December 2020 says that the use of an asset, even when it is frozen, is not prohibited.
The Minister will forgive the Opposition for growing frustrated over the years at the economic policy that the Government have pursued, which has created a country of haves, have-nots and have-yachts. He can imagine how frustrated we are that the Government will not even seize the yachts when they belong to oligarchs. Somebody has very kindly shared with me a list of candidates that the Minister might want to consider: the My Solaris, owned by Roman Abramovich; the Eclipse, which is sailing in the north Atlantic and which the Government would have no means of either seizing or freezing as an asset if it docked at a UK port; the Valerie, owned by Sergey Chemezov, which is currently in Barcelona; the Lady Anastasia, which is currently in Mallorca in Spain; the Tango, which is also in Mallorca; the Palladium, which is currently in Barcelona; the Aurora, in Barcelona; Here Comes the Sun, in Mallorca; Ice, in Genoa; the Ragnar, in Narvik; Sailing Yacht A, owned by Melnichenko—
The Chairman of Ways and Means (Dame Eleanor Laing)
Order. I appreciate that the right hon. Gentleman has a long list. It is enlivening proceedings and we are all grateful, but we do not have time. Will he please truncate his speech? Just say, “and 12 more,” or something like that.
Liam Byrne
I am grateful for your guidance, Dame Eleanor, because I think I have made my point: the Government need to take on more power to seize and freeze these assets.
The final point I wish to make is about strategic lawsuits against public participation. We recently had a good debate on lawfare, sponsored by the right hon. Member for Haltemprice and Howden and myself. In amendments 37 and 38, we make proposals that the Government could adopt. I do not wish to press them to a vote tonight, but I would like the Minister to confirm what the Foreign Secretary and the Justice Secretary said in the media on Friday. The Justice Secretary told “BBC Breakfast” that SLAPPs were an
“abuse of our system and I’m going to be putting forward proposals to deal with that and to prevent that”.
The Foreign Secretary later told The Guardian that she had asked Government lawyers to “find literally any way” to crack down on SLAPPs. I would like this Minister’s confirmation that that is indeed going to happen, not in some consultation response to the Human Rights Act, but as a stand-alone piece of legislation, so that we can live in truth in this country. It is outrageous that English courts are being used as a means to silence journalists such as Tom Burgis, Carole Cadwalladr and Catherine Belton. I want great books such as “Butler to the World” by Oliver Bullough to be written with the freedom to tell the truth, and at the moment the oligarchs are denying us that freedom. They are launching a war on free speech in English courts, of all places. That scandal has surely got to stop.
I will conclude by saying that it is now clear that what our country needs Russia is a recontainment strategy towards Russia. That will entail a refortification of the NATO frontline to the east; resupplying the Ukrainian forces; and suppressing and repressing the Russian economy. Sanctions do not produce instant results—Presidents Mugabe and Maduro presided over economies in ruin for many years—but this would give us progress.
David Linden (Glasgow East) (SNP)
I rise to speak to amendment 63, which stands in my name and those of my colleagues. I am grateful to you, Dame Eleanor, for selecting it as a manuscript amendment, particularly at such short notice. I am not normally a fan of ramming a Bill through in such short order, but I understand the need for speed in this case.
As others said on Second Reading, the Bill is to be broadly welcomed, but it does not go far and fast enough. A much bigger and more wide-ranging debate stems from the Elections Bill, which is currently in the other place, and the eligibility of overseas voters and donors to influence our politics, but I do not think we want to go too far down that rabbit warren this evening. However, clause 38 makes provision for financial penalties to be applied in respect of overseas entities, and I support that.
My amendment seeks to close off a loophole: we could apply significant financial penalties to an individual, yet said individual, even if they lived overseas, would still be able to vote and, more concerningly, donate significant sums to UK political parties and influence our elections. I am the first to accept that our focus right now should be on applying the maximum economic sanctions on Russia to alleviate and end the military bombardment that it is subjecting the poor people of Ukraine to. It strikes me as a little bizarre that we can have a debate—and indeed legislate tonight—on the issue of dirty Russian money in these islands, but miss a trick by not also cleaning up our politics of said dirty Russian money. Countless warnings have been sounded on this issue, most notably in the Intelligence and Security Committee’s Russia report, which flagged up the vulnerability of our politics to Putin’s influence in cyber and in funnelling money into some political parties and referendum campaigns.
Cat Smith (Lancaster and Fleetwood) (Lab)
The point made earlier by my hon. Friend the Member for Rhondda (Chris Bryant) was that so much of this Bill has been so slow in being forthcoming. There were huge delays in publishing the Russia report. Does the hon. Gentleman share my concerns that, given the report’s findings of Russian influence in British politics, that was another act by a Government who were perhaps benefiting from that?
David Linden
I am grateful to the hon. Lady for that. Even the Minister who is piloting the Elections Bill through in the Commons admitted that she had not read the Russia report, so it is no surprise that the Government are so ignorant towards it. It is an indisputable, though regrettable, fact that the Conservative party has previously accepted donations from people who have ties to the Kremlin. Such gifts to the party are legally, if not ethically, legitimate, in so far as they are within current electoral law when properly declared. However, lines have been drawn between senior Conservatives and some pretty unsavoury characters.
David Linden
If I may, I will continue.
The genesis of my amendment comes from the fact that the Bill, as drafted, would make provision for an individual to be found to have committed an offence under part 1 of the Bill. The registrar would be able to impose significant penalties which I—indeed, I assume all of us—would support, but without the inclusion of my amendment 63 in the Bill, that individual would still be permitted to participate in UK democracy and, crucially, to donate money—dirty money—to influence our elections. If we leave this loophole open and unchecked, we will be in a perverse position in which Putin’s cronies are still polluting our politics with dirty money, even after they have been sanctioned through the use of the very legislation that we are discussing this evening.
One of the problems of rushing legislation is that we miss many issues that would be found during a proper process of scrutiny by both Houses. As I have said, there is much more than we can do in this regard. I should be interested to hear from the Minister, when he winds up the debate—probably just about now—why the Government would think that this small but important amendment, intended to tie up a loophole, should be rejected tonight. I look forward to his response.
Hywel Williams (Arfon) (PC)
It is both telling and deeply disappointing that it has taken a vicious and horrific conflict to bring us to this point of closing down the London laundromat.
I am speaking on behalf of my party rather than proposing any specific amendments, so I shall be very brief. I welcome amendments 42 to 44, tabled by the right hon. Member for Barking (Dame Margaret Hodge), to toughen penalties for non-compliance with the register. We see this as a necessary precondition to increase the immediate costs of non-compliance with UK law. We will also be supporting the right hon. Member’s new clauses 2 and 3.
Past actions, including the much-trumpeted unexplained wealth orders, have done little to dent Russian influence in London, partly owing to the Government’s poor resourcing of enforcement agencies. New clause 2 would bring long overdue scrutiny of that significant weakness, and renewed support for our enforcement agencies. As the Russia report made clear, illicit money does not simply flow into London and the UK by its own volition; it is eased in by a wide network of enablers, from bankers to lawyers to estate agents—Russia’s little helpers in stashing ill-gotten gains and off-the-shelf influence. That is why we will also be supporting new clause 3, as well as amendment 41, tabled by my SNP colleagues, in order to curb the ability of shell companies and other indirect ownership instruments, as well as their paid London enablers, to obfuscate ownership structures for their clients. Those measures, along with new clauses 4 and 9, will tighten the massive loophole that prevents us from having a properly resourced, properly empowered and properly directed Companies House.
New clause 21 would help to address the issue of enforcement in Crown dependencies and British overseas territories. My hon. Friend the Member for Ceredigion (Ben Lake) has already raised with the Foreign Secretary the issue of the enforcement of sanctions in overseas territories such as Bermuda, where more than 700 Russian civilian aircraft are registered. We hope that new clause 21 will bring clarity to this long-standing grey area of enforcement.
However, none of this matters if the targets of the Bill are able to make off with their loot in the next few weeks. I therefore urge the Government to work with the Opposition, and to support new clauses 28 and 30 to ensure that the sanctions and the powers work to the maximum possible effect.
Dame Angela Eagle
I support all the amendments that are intended to close loopholes in this long-overdue legislation, narrowing the gap between the Government’s rhetoric and the reality of what it is possible for them to do, strengthening the legislation, and ensuring that we have transparency so that we know who owns what, so that people can indeed be sanctioned, and so that their progress across our financial system can be followed in a meaningful way to make sanctions a reality. I also support new clauses 7 and 2, which seek to beef up enforcement.
Today, we in the Treasury Committee heard that the Office of Financial Sanctions Implementation has 37.8 full-time equivalent staff. I put it to the Government that that is not nearly enough for us to make sanctions against Russia workable and effective. We also learned recently that the National Crime Agency had no Russian speakers. I am not sure how it is meant to pursue sanctions against Russia if it does not have anyone with the appropriate language skills to do so. I hope that it will be beefing up its enforcement activities as well.
We understand and support what the Government are trying to do with this legislation. It is long overdue, and we think it needs to be strengthened. The bewildering and fragmented nature of enforcement, and its underfunding, must be put right if we are to get to the stage where we can finally deal with the corruption of our financial system and its infiltration by those authoritarian regimes and kleptocrats who are putting our democracy at risk, and who, even as we are having this debate, are murdering and bombing innocent people in Ukraine and threatening the peace and prosperity of Europe and the world. I hope that the Government will listen and accept a lot of these amendments by the time the Bill comes back to this House in due course.
Kim Johnson (Liverpool, Riverside) (Lab)
I rise to speak in support of new clauses 7 and 8, but I want to start by expressing my solidarity with the people of Ukraine, who face unimaginable heartbreak and horror, and particularly to black residents who have been subject to unacceptable levels of racism and brutality. I call on this Government to open our doors and welcome without discrimination all refugees who are fleeing oppression, violence, occupation and war. I applaud the courageous protesters in Russia, at home and across the world who are demonstrating for peace.
The National Crime Agency estimates that £100 billion of dirty money flows through the UK every single year. This is not a new phenomenon. Since as early as 2016, the Government have been making empty promises for tighter regulations to prevent these illicit activities, but since then, £1.5 billion-worth of property here has been bought by Russian oligarchs accused of corruption with links to the Kremlin. As long ago as 2018, draft legislation was published by this Government for a register of beneficial ownership to consolidate and clarify our legal structures in order to prevent profiteering by way of laundering money through the UK property market, but despite a wealth of evidence pointing to the illicit activities of oligarchs in London and elsewhere in the UK, the Government have done nothing but kick the can into the long grass. Given the almost £2 million received in Russia-linked donations by the Tory party since the current Prime Minister entered No. 10, it seems pretty clear why.
Labour has consistently been on the front foot when it comes to clamping down on oligarchs. Our plan included an oligarch levy to tax secret offshore purchases of UK residential property, the application of the Magnitsky clause to apply sanctions against human rights abuses, and to extend the beneficial ownership register for Crown dependencies and overseas territories. Labour has not just jumped on the bandwagon now that this has become the issue of the day; we have been putting forward detailed plans to tackle this injustice for many years, as my hon. Friend the Member for Rhondda (Chris Bryant) has pointed out. Our amendments today will give this toothless Bill some bite, speeding up action against some of the worst offenders and bringing forward reforms to Companies House that will root out the activities of criminal elites who are legitimising their loot in the UK without scrutiny or repercussions. I hope the Minister will commit today to backing our amendments.
Paul Scully
I thank all hon. Members who have spoken in this important debate for their constructive approach to this important legislation, and for their engagement prior to today as well. Let me quickly whip through as many of the points that have been raised as possible. The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) talked about SLAPPs. The Deputy Prime Minister made a call for evidence on Friday, and it is definitely not just a listening exercise. It is important that we act when we need to act.
Nominees were raised both on Second Reading and in Committee. If nominees are directed by someone else—say, the beneficial owner—the person doing the directing is caught by condition 4 in paragraph 6 of schedule 2 and is therefore a registerable beneficial owner. My hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) and the right hon. Member for Barking (Dame Margaret Hodge) both made important points, and I am keen to work with them in the coming days to make sure we do not leave any gaps. We have a common interest in doing so.
The Government tabled the amendments to reduce the transition time from 18 months to six months but, as I said in my closing speech on Second Reading, I see merit in requiring all those selling property to submit a declaration of their details at the point of transfer of land title during the transition period. In effect that means we will be giving sellers a zero-day transition period. They will have to register ownership, so we will get their ownership details either when they sell or at the end of the transition period.
I am keen to work with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) to see how far we can go in the other place, because this is difficult to draft. I hope he is satisfied will an invitation to sit down with me in the coming days so that we can give further consideration ahead of finalising the Bill in the Lords. I therefore ask that the other amendments in this area are not pressed.
On new clause 7, tabled by the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), it would serve little purpose to introduce new legislation at the end of this parliamentary Session as it would actively harm the quality of the measures we are introducing in the broader economic crime Bill early in the third Session—I accentuate the word “early.”
We spelled out the Government’s position on the further reforms to increase the reliability of the information on the register and the ability of Companies House to share data in the “Corporate Transparency and Register Reform” White Paper, and the forthcoming economic crime Bill will introduce those measures early in the next Session, but we want to make sure that we get it right because this is the biggest change to Companies House law for nearly 200 years.
On amendments 10 and 11, also tabled by the right hon. and learned Member for Holborn and St Pancras, I point out that the Government tabled amendment 49, which commits to introducing regulations under clause 16 on information verification so that they come into force before any applications for registration may be made under clause 4(1). Amendment 49 achieves in practice what amendments 10 and 11 seek, so I hope those amendments will not be pressed.
The hon. Member for Glasgow Central (Alison Thewliss) talked about Companies House reform and verification, which is something we are introducing. People with anti-money laundering expertise will look at this within Companies House.
I think I have highlighted my intentions regarding amendments 24 and 25, which obviously seek to add to the list of statements an overseas entity must provide to the registrar when applying for registration or when complying with the updated duty. I see the merit of the proposals made by the hon. Member for Rhondda (Chris Bryant), and we take these matters seriously. As I said, we will look further at these proposals and we will work together to make sure we can do this in the other place.
I heard the hon. Gentleman’s protestations that amendment 26 takes out three words. However, it is our opinion that removing those three words may have unintended consequences. It is not quite as easy as simply taking out those three words. I would like to work with him to make sure that, if there are any unintended consequences, we can have something that gets the drafting absolutely correct. I therefore ask him not to press the amendment, in the spirit of unity in this House on standing together to make sure we have the strong measures we all want in the Bill.
Chris Bryant
The more we can present a united front—particularly tomorrow—the better, so I will of course not press the amendment.
Paul Scully
I am grateful for the spirit the hon. Gentleman shows.
Let me turn to new clause 29, tabled by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis). I thank him for his innovative suggestion to provide a power for the Secretary of State aimed at the prevention of asset flight prior to the formal imposition of sanctions. Members will have seen that since my right hon. Friend tabled his new clause we have expanded the Bill with new provisions from the Foreign, Commonwealth and Development Office. Those additional measures aim to ensure that we can respond even more effectively to world events using sanctions.
We strongly support measures to ensure that sanctions are effective. The Government amendments will ensure that we can go further and faster to make new sanctions designations. It is hoped that our amendments will go a significant way towards dealing with the kinds of situation that my right hon. Friend may have in mind. I remind the House that the register is not a seizure mechanism in itself. Law enforcement agencies already have the powers to seize property if there is evidence of wrongdoing. Such powers underpinned the restraining, freezing or seizure of more than £979 million-worth of assets in 2020-21. We have swiftly implemented the strongest set of economic sanctions ever imposed against a G20 country.
I see the intent behind amendments 3 and 40, the latter of which would have no effect as the Bill already provides that a beneficial owner must register as a trustee of a trust if they are one. Amendment 3 would not have the effect that we believe is sought, but I can see the potential merit in such an amendment and assure the House that we will look further at the intent behind the proposal to see whether there is a workable alternative.
I thank the right hon. Member for Barking for tabling new clause 2, which seeks to place an obligation on the Secretary of State to provide additional reporting on the funding of enforcement agencies. The NCA and enforcement agencies like it have a duty to be open and transparent in their deployment of public funds. The agencies publish annual reports on their expenditure that can be found online. The Government have developed a sustainable funding model that demonstrates our commitment to tackling economic crime. The combination of this year’s spending review settlement and the private sector contributions through the levy will provide around £400 million of funding in respect of economic crime over the spending review period. Since 2006-07, just under £1.2 billion-worth of assets recovered under the Proceeds of Crime Act 2002 have been returned to law enforcement agencies, prosecutors and the courts to fund further asset-recovery capability or work that protects the public from harm.
New clause 4, tabled by the hon. Member for Glasgow Central, would make the registrar of companies the AML supervisor of overseas entities. We believe that is unnecessary as the Bill already requires the verification of registerable beneficial owners and the managing officers of overseas entities. We expect that that will be done by a UK anti-money laundering supervised professional so believe that such supervision is already in place.
On amendment 4, the Bill currently enables the Secretary of State to exempt a person from the requirement to register in three circumstances. The circumstances outlined in the Bill have been carefully considered to provide clarity and flexibility for unforeseeable but legitimate scenarios. Given that the register’s key objectives are to improve transparency and combat money laundering, the exemptions will be used carefully for evidenced and legitimate reasons.
I thank everybody who has been involved in the Bill. The process has been done at such pace but we are determined to use the next few days to get this absolutely right.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. I understand that some pass readers in the No Lobby are not working, so we are extending the time by which people are able to vote by another two minutes. [Hon. Members: “No!”] That is right—the No Lobby.
Economic Crime (Transparency and Enforcement) Bill
Tuesday 8th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Amendment Paper: HL Bill 126(a) Amendments for Committee - (8 Mar 2022)
Economic Crime (Transparency and Enforcement) Bill
Wednesday 9th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 126 Running list of amendments - (9 Mar 2022)
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, in light of Russia’s invasion of Ukraine, it is vital that we take new action to crack down on Russian dirty money and corrupt elites in the UK. The measures in the Bill—passed with cross-party support in the other place—will enable us to better identify, investigate and sanction the illicit wealth of those who wish to abuse our open economy. While we are rightly focused on taking action against Putin’s regime, these measures will strengthen our framework for tackling economic crime for the long term.
I have been heartened by the previous offers from those across all parties, including on the Opposition Front Benches, to support and co-operate with the Government on emergency legislation and to offer practical support to ensure that the Economic Crime (Transparency and Enforcement) Bill is implemented. I very much hope that we can continue to work in this spirit.
The Bill comprises some emergency measures, developed in light of Putin’s outrageous actions in recent weeks, and other measures that have been planned for quite some time. The first is a new register of overseas entities, which will require overseas companies owning or buying property in the UK to give information about their true owners to Companies House. This will provide more information to help law enforcement identify those using UK property as a money laundering vehicle.
Secondly, there will be reforms to unexplained wealth orders, which are a key tool for the investigation of suspicious assets. Through this Bill, we will improve their effectiveness and make sure that they can be applied to complex ownership structures.
Thirdly, we will streamline the sanctions Act to enable even swifter sanctioning of oligarchs and businesses associated with the Russian Government. The Bill also includes amendments to financial sanctions legislation, including strengthening the Treasury’s power to impose monetary penalties on those who violate our financial sanctions laws.
These are the actions that we can take most swiftly but they are not the sum total of our ambition. We will introduce a second economic crime Bill with further measures as early as we can in the next Session. This will include major reform of Companies House, reforms to prevent the abuse of limited partnerships, new powers to make it easier to seize crypto assets from criminals and measures to provide businesses with more confidence to share information on suspected money laundering. This second Bill will be a substantial piece of legislation. I know that some of the measures it contains have long been called for. I can assure the House that drafting is under way and we will bring it forward as soon as we are able.
I will now provide more detail on the measures in today’s Bill. The Bill will create a register of overseas entities which will require anonymous foreign owners of UK property to reveal their real identity, ensuring that they can no longer hide behind secretive chains of shell companies. We know that corrupt wealth is stored in property in this country, and this new register will help us to find it. Too often, investigators at the National Crime Agency and other bodies reach a dead end when they find that a property of interest to them has its title registered in the name of a foreign company. It can be very difficult to obtain adequate information about that company, depending on where it is registered.
This new register would apply essentially the same beneficial ownership requirements to these companies as already apply to domestic companies registered at Companies House. An overseas entity that owns or wishes to own land in the UK will be required to take steps to identify its beneficial owner or owners and register them with Companies House. They will be required to verify that information and evidence that verification, and they will be required to update information annually. The provisions will apply retrospectively as far as Land Registry data allows: 1999 in England and Wales, and 2014 in Scotland. Should a foreign company not comply with these new obligations or submit false filings, its managing officers can face criminal or civil penalties. In many cases, these officers may be overseas and beyond the reach of UK law enforcement. That is why the key sanction will be the loss of rights to sell or lease the property until the register is populated with verified information.
I emphasise to the House that this is an information measure—an additional tool for law enforcement to use to inform investigations, including the case for making an unexplained wealth order. It is not a necessary underpinning of the actions we are taking right now to sanction allies of Putin. Rather, it will help to clean up our property market over the long term. However, I am mindful that many in your Lordships’ House will want to see it implemented as swiftly as possible, and I can assure the House that work to deliver the register will begin as soon as the Bill receives Royal Assent. A transition period will be in place as an essential protection for the many legitimate businesses and individuals who are likely to be holding property through overseas entities. Noble Lords will know that the Government have already amended the Bill in the other place to reduce this period to six months. We have committed to looking at how any entity in scope of the register selling its property before the register is operational should not be able to evade that scrutiny.
I turn now to the reforms to remove barriers to the use of unexplained wealth orders. These changes will increase the time available to law enforcement to carry out investigations, allowing them to be more comprehensive. We will also reform cost rules so that agencies will not be required to pay respondents’ costs unless they act dishonestly, unreasonably or improperly. This will remove a key barrier that discourages the use of UWOs and will increase and reinforce operational confidence in their use.
With this legislation, unexplained wealth orders will become more effective against those who hold property in the UK through trusts and other complex ownership structures. By targeting those who manage the properties on behalf of the beneficiaries, law enforcement will be able to obtain information that may be obscured by the beneficiaries. Individuals will not be able to hide behind shell companies and foundations any more.
I turn now to the amendments introduced to the Bill in the other place by which we propose to revise the sanctions Act. They will allow us to sanction oligarchs and businesses associated with the Russian Government even more swiftly, in concert with our allies. The new measures will ensure that we have the power to use urgent designation procedures to temporarily mirror the listings that have already been adopted by our allies. The United States, Canada, Australia and the EU are listed in the Bill, and others may be added by regulation.
We will remove the statutory test of appropriateness for making designations, thus simplifying the process. Ministers will still need to be satisfied that there are reasonable grounds to suspect that the person to be designated is “an involved person”, usually on the basis that have been involved in a specified activity. In the context of Russia, the activities specified in regulations include destabilising Ukraine, undermining or threatening its territorial integrity and supporting the Government of Russia. This is the right test to focus on in sanctioning an individual, without unnecessary statutory hurdles.
The Bill will remove some of the constraints on designations by description so that the Government can designate groups of individuals more quickly—for example, members of defined political bodies such as the Russian Federation Council. The Bill will also remove burdensome requirements to formally review each and every sanction every three years, freeing up vital resource to focus on developing new designations. However, designated persons will continue to have the opportunity to ask for their designation to be reviewed through an administrative review, and for the outcome of that review to be considered by the courts. Ministers will continue to be under a duty to revoke a designation where the relevant tests are no longer met in respect of it. The Bill will streamline reporting requirements while ensuring that Parliament can continue, rightly, to hold Ministers to account.
We are seeking to protect the public purse by permitting the payment of damages in connection with designations only in the case of bad faith. The Bill also provides a power to impose a cap on damages applying to any proceedings issued after 4 March, when the amendments were originally tabled in the other place. This will limit the ability of deep-pocketed oligarchs to claim massive payouts from sanctions challenges.
The Bill will also enhance the enforcement of financial sanctions. It will make it easier for the Treasury to impose significant monetary penalties, to name publicly those who have breached financial sanctions and to expand information-sharing powers.
We are collaborating with the devolved Administrations on this Bill. Provisions in it relating to the register of overseas entities and unexplained wealth orders engage devolved powers in both Scotland and Northern Ireland. We will continue to work with them on implementation and I am confident that we can rely on their continued support, for which I am very grateful.
The Government have consulted on the measures in the Bill. The register of overseas entities was the subject of extensive consultation and pre-legislative scrutiny. The Government accepted and acted on most of the Joint Committee’s recommendations. We have designed the reforms of unexplained wealth orders in close consultation with law enforcement agencies and representatives from the accountancy, financial and legal sectors. The Treasury will engage with industry on updating the guidance for financial sanctions before this reform takes effect. I can therefore assure the House that the Government are not acting rashly, and I urge it to support the Bill.
The Bill will ensure that our economy becomes more transparent and stronger at the same time. It will give our enforcement agencies the powers they need to effectively tackle dirty money. The House will be in no doubt, and will have noted, that the other place overwhelmingly supported the Bill when it was considered there on Monday. The Government worked with the Opposition there to strengthen and accelerate the package, and there was a clear and strong desire across party lines to present a united front by passing the legislation as swiftly as possible. I urge noble Lords to take a similar approach in this House. With that, I beg to move.
Baroness Chapman of Darlington (Lab)
My Lords, we warmly welcome the arrival of the Bill and we are pleased that the Government have promised to introduce a further economic crime Bill in the next Session. In warmly welcoming the Bill, I would just like to make some points to noble Lords. This is significant progress compared with the position outlined by the noble Lord, Lord Agnew of Oulton, in January, when it appeared that the Government did not want to treat this as a priority issue. But now Putin has left them with no choice. Until now, I am afraid there has been a persistent and troubling lack of political will to act on these issues from the Government. It has taken war to bring about this change of position, and the Government should have acted sooner.
This is welcome, but we do not kid ourselves. The Bill does not resolve all our issues, but it is a stopgap and we will support it. It is the first instalment and we await the detail in part two. I welcome the noble Baroness’s assurances in her speech that part two will be extensive and we look forward to it. The Bill introduces a register of overseas entities, revisions to the function of unexplained wealth orders and changes to the Government’s sanctions regime.
There has long been a case for a new register such as the register of overseas entities. We have been promised it time and again, as far back as the Anti-Corruption Summit of 2016. But the Government have always failed to produce the goods when pushed to do so, and this we regret. We have had multiple consultation exercises on this issue, yet it has taken until now for the Government to move. We have known about weaknesses in the UK’s anti-money laundering regime for some time, with the Financial Action Task Force noting in 2018 that there was a need for substantial increase in resources devoted to financial intelligence as well as a series of other, fundamental reforms.
The truth is that for too long the Government have turned a blind eye to illicit funds being funnelled through the British economy—up to £100 billion per year according to the NCA. There is, as we know, no silver bullet to fight against economic crime. This new register is a much-needed tool, but it will not work unless we get the next Bill right, including by addressing the long-running concerns about the resourcing and powers of key investigatory and enforcement bodies.
Turning to unexplained wealth orders, this tool has not been as effective as hoped so far, so we welcome the various moves to strengthen the unenforced wealth order regime. It is vital that these orders are used. It is important that we understand why so few of those orders have been implemented so far—only 15 orders and four cases. This cannot be explained away entirely by the risk of legal costs. The capacity of the NCA, SFO, FCA, HMRC and CPS to handle these orders also needs to be considered. The Government’s new Clause 31, requiring the Secretary of State to publish annual reports into the use of unexplained wealth orders, is definitely a positive step and we welcome it.
The Bill amends the Sanctions and Anti-Money Laundering Act 2018. The Government are making it easier to replicate the EU’s decisions in this and we welcome the collaborative working in this area with our international partners. This is a demonstration of strength and we back it. The campaign for an effective sanctions regime, though, began following the death of Sergei Magnitsky in 2009. The measures we are finally seeing now are welcome, but we do ask ourselves whether we will not be looking back and wondering whether we would be in a stronger position today had we acted sooner.
If we are to isolate Putin and his network of oligarchs and kleptocrats, the Government need to use these new powers immediately, bringing both pace and breadth to their response to events in Ukraine. While the Bill is not solely about Russia’s illegal and immoral invasion of Ukraine, it is regrettable that recent events have had to unfold before the Government have been prepared to bring these measures forward. Nevertheless, we will show solidarity with Ukraine by assisting the Government in the swift passage of this legislation. It is a common-sense approach to beginning to crack down on the shocking level of economic crime that has taken root in this country.
The Opposition have worked constructively with the Government since they announced the Bill and I am grateful to Ministers in the other place for adopting several of our key asks, including a reduced grace period for registering beneficial ownership and much harsher fines for those who break the rules. There remains, though, more to do. The grace period may have fallen from 18 months to six, but we on these Benches think it is still too long. Properties will be sold and other assets disposed of in far less time, severely undermining the effectiveness of the new register.
As drafted, the Bill does not yet do enough to crack down on the so-called enablers of money laundering and other forms of economic crime. They are arguably as guilty as those who seek to bring illicit funds to our shores in the first place. We know that Ministers are looking to bring forward amendments in a number of areas; we hope they will respond to concerns voiced by noble Lords in this debate today. Can the Government also offer us assurances that the follow-on Bill will be subject to normal processes, allowing both Houses to study and debate all the relevant measures in detail? I hope your Lordships will pass the Bill without undue delay but, in doing so, can we commit this evening to finally tackling the shameful spectacle of illicit money being laundered through our country?
Baroness Kramer (LD)
My Lords, every day’s delay in bringing in these measures costs Ukrainian lives, so these Benches join in wishing to pass the Bill urgently. We have, however, been calling for the key property ownership elements in the Bill for years, and we wish we had had them at a time when we could have gone through it carefully, clause by clause, and amended their various flaws.
I am delighted that the Minister has given us an assurance that she will bring the sequel to the Bill promptly. We will be watching for that. It must, as she said, deal with Companies House, limited partnerships and cryptocurrencies, which I am glad she mentioned. I take note that Russia, on the day of the invasion of Ukraine, moved to control key crypto exchanges, and I say to the Government that it may be necessary to move on that issue ahead of part two, because it is an obvious escape hatch that Russia is taking full advantage of. We also hope that in part two the Minister will address two other areas: trusts, which appear not to be fully covered by Schedules 2 and 3, and freeports, with their secrecy privileges. There will be a great deal to do in part two.
As for this Bill, let me start with provisions that deal with the public register of the beneficial ownership of property in the UK. Why have those with property interests purchased with dirty money and hidden by shell companies been given a six-month transition period, during which implementation is suspended? I accept that this is less of an escape hatch than the original 18-month transition period in the first version of the Bill, but it still gives any oligarch plenty of time and scope to alter their arrangements, including by liquidating and moving assets out of the United Kingdom into a safe haven. I understand that the office of the registrar needs to be staffed, resourced and trained, but that should be done urgently and, if necessary, the registrar should be loaned staff to bring its capacity up as quickly as possible.
Surely, penalties for breaching the rules should be retro-effective. It is a technique used by HMRC, particularly against small taxpayers under the loan charge, and it seems ideal to be adapted to this particular set of circumstances. Perhaps the Minister could also tell us whether there are existing powers that could be sharpened to cover the transition period.
Why does the Bill give the Secretary of State sweeping powers to exempt anyone from the register in the interests of the economic well-being of the United Kingdom? That is an incredibly broad criterion, but particularly inappropriate in this country, where allies of Putin are utterly enmeshed as major players in our economy, from media to sport to manufacturing. I am sure that no Minister would dream of making an exemption now, during the Russian invasion of Ukraine, but the clause is a message—and not a subtle one—that, once the crisis fades, anyone with a significant investment in the UK economy, regardless of the source of their money, can expect the privilege of an exemption.
Again and again in this House, your Lordships have warned that the Bill must deal with the network of enablers: the legal firms, the accountants, the developers, the banks—in effect, those who have opened the gate to dirty money and used all their skills to keep it open. I said a few days ago that this would be painful. Enablers include many respected names with very close ties to the political establishment; but why does the Bill not crack down on them and why is there no failure-to-prevent clause included in the Bill, or some equivalent kind of action? It is absolutely vital.
I will say only one thing about unexplained wealth orders. I do not wish to belittle them but, given the extraordinarily high income that oligarchs and kleptocrats enjoy from their many business interests, how useful are these orders and these clauses in our current emergency? Do they really have very much practical relevance? I am not opposed to them, but let us not put undue weight on them.
I welcome the strengthening of sanctions, but I say to the Government that, whenever anything is done in hot haste—and it has to be done that way on this occasion; I fully accept that—it is very sensible later to do a review and work out whether what was needed was done, whether there was any overreach and whether the measures were entirely appropriate. I hope we will hear that from the Government.
Lastly, enforcement absolutely matters. How confident are the Government that the Crown dependencies and overseas territories have adequate sanctions and controls and enforcement capacity? For us, what is the Government’s resourcing plan? The registrar’s office, which will have to verify all this hoarded information, will face a mountain of data and process. When will it be staffed? At the last asking, the National Crime Agency, on which we heavily depend for enforcement, had only 118 staff to investigate all financial crime, despite its complexity and the powerful lawyers and accountants used by the other side. How many additional staff, rather than transferred staff, will there be in the new kleptocrat cell and when will it be up and running, effective and fit for purpose?
If ever there was a time when we needed whistleblowers—and fast—it is now. They are not even mentioned in the Bill. The United States recently passed the Kleptocracy Asset Recovery Rewards Act, with cross-border and extraterritorial jurisdiction. Are we seriously telling whistleblowers, “Go to the Americans—we can’t be bothered”? Or will the Government commit to tackling this omission, hopefully in this part of the Bill, but, if not, absolutely, definitely in Part 2?
Lord Vaux of Harrowden (CB)
My Lords, I remind the House of my interest as a chartered accountant—which I hesitate to do after the last speech, I have to say. Like most noble Lords, I welcome this Bill, although I greatly regret the Government having to introduce these measures in such circumstances and in such a rush. We have tolerated for far too long the UK—and London in particular—becoming a haven for the ill-gotten gains of criminals. Of course, we need to get this Bill onto the statute book quickly, so that we can effectively sanction those responsible for the atrocities taking place in Ukraine.
Economic crime, however, is a much wider subject than Russia, and we have a lot of work to do to remedy the laissez-faire attitude to economic crime that has pervaded government policy—or, perhaps, lack of policy—in the last decade. The resignation speech of the noble Lord, Lord Agnew, said it better than I ever could. There is much more to do than is covered in this Bill, and I was pleased to hear the reassurances about the follow-up Bill.
In my comments, I will concentrate on the overseas entity register, but I have one observation on the unexplained wealth order clauses. The Government have blamed the aggressive use of legal action by oligarchs as the major reason why UWOs have not been successful so far. I am sure that there is some truth in that, but I am unconvinced that it is the main issue. More likely, the major problem is the lack of a properly resourced enforcement agency—something we also see in the wider issue of fraud more generally. I understand the reason for introducing legal costs clauses, but I do feel uncomfortable that someone who is entirely innocent will not be able to recover the potentially huge legal costs to defend themselves.
The overseas entity register is a good start, but I am afraid I do not expect it to make much practical difference. Innocent people will provide the required information—which is useful in itself—but those who are using offshore structures dishonestly to hide their identity will still be able to do so. There are many other ways of hiding ownership, including discretionary trusts, undisclosed nominees, complex corporate structures and so on. The current alleged situation of Graham Bonham-Carter and Oleg Deripaska is a good example of how this can happen.
So, in the spirit of being helpful, how might we improve this? First, while the reduction from 18 months is welcome, the time period of six months is still too long. In fact, the period is more than six months, because these clauses do not commence until such date as the Secretary of State decides. Can the Minister say when that will be? Six months still gives a lot of time for people to rearrange their affairs to avoid the rules. I would have favoured 28 days, but perhaps the three months that the Institute of Chartered Accountants has suggested might be a good compromise.
Secondly, while the new rules will prevent a property being sold once the rules are in force until the entity is registered, this does not stop the sale of the company, or, indeed, of a company further up the chain. The Bill will therefore not prevent a criminal realising the value of the property. Frankly, there is probably not a lot we can do about that, but I note that the register will only have to be updated annually, so it may be a very long time before we discover the change. It would be better if the changes to the beneficial ownership had to be updated on the register immediately after the transaction takes place. The Companies Act 2006 requires the persons of significant control register to be updated within 14 days. Perhaps the Minister could explain why the overseas entities register is different from that?
Thirdly, the register will be pointless if there is no real verification of it. One way to improve that would be to leverage the due diligence that should already be happening under anti-money laundering legislation, although clearly this does not always happen as well as it should do. At the moment, we rely on the passive, risk-based requirement to report suspicious activity. It would seriously concentrate the minds of lawyers and accountants who advise those using offshore entities if there was an active requirement for them to place a statement on the register that they have carried out their due diligence and are satisfied that the beneficial ownership is correctly stated, and if we also made sure they were liable for that statement under Clause 15. As well as improving the integrity of the register, this would have the additional impact of making those who are enabling the hiding of assets to think very seriously about it. The requirement for such a statement could easily be included in the regulations to be made under Clause 16. Is that something the Minister would consider?
This Bill is a start, but it is a rushed Bill, issued to deal with an emergency situation, and scrutiny is being substantially curtailed. It is not without flaws. As I said, the subject of economic crime is much wider, and deserves much greater work and consideration. I was pleased to hear the details of the follow-up Bill, which needs to be comprehensive. Can the Minister please make a clear statement that the follow-up Bill—given the curtailed nature of the scrutiny here—will allow the matters covered in this rushed Bill to be looked at again, with the more detailed scrutiny the subject needs and deserves?
The Lord Bishop of Leeds
My Lords, I welcome this Bill and the speed with which it is being brought to us, but I share some of the concerns that have been represented already. I do not intend to go into any of the detail of matters that have already been spoken about; I am sure other noble Lords would be better at that than I might be.
I hesitate to bring an ethical argument because, in my experience in this House, ethical arguments simply get ignored. Indeed, one Minister replied to an ethical argument made on a different Bill by saying, “We will not listen to strictures on morality from anyone.” That led me, at the next stage—on Report—simply to say that that implies there is no place in politics for ethics. But it is my ethical concerns, which one might represent as cultural, that cause me to stand now.
Culture is not cleaned up by one act or one reaction to a particular stimulus, albeit a serious one such as the invasion of Ukraine. Some months ago, the Foreign Secretary threatened that sanctions would be introduced if Vladimir Putin invaded Ukraine. At the time, I thought that we should not be threatening that as a reaction to something else that happens. This stuff is immoral. The money that is sweeping through the sewers of London needs to be cleared up for its own sake, not simply as a bargaining chip in relation to Ukraine. If we are going to get rid of dirty money, we ought to do so because it is a moral obligation, not because it is a tactic.
If money is dirty and people are—we keep hearing the word—corrupt, is it that the money is indeed dirty and these people are indeed corrupt, or is it just that the game has changed, so it is now convenient for us to label them in that way? They were not corrupt six months ago, a year ago or five years ago—that was just the reality of the world in which we lived. If it is just the game that changes, and therefore we react to that, I think we have an ongoing ethical, cultural problem. We are tactical, and that is all. If we are going to change the culture, we have to be led by conviction rooted in values, not simply the pragmatics of the particularity of the case we are dealing with.
I am very pleased that an amendment will be tabled in Committee to Clause 18, so I will not say more about that now. I welcome the Bill, but I am concerned about the wider culture within which it sits; I hope that that will be registered, even if disagreed with.
Lord Garnier (Con)
My Lords, I thank my noble friend the Minister for her clear opening to this debate on this very important piece of legislation. It is also a pleasure to follow the right reverend Prelate and to hear what he had to say.
I refer to my interests in the register and declare that, as a barrister in private practice, I have been instructed both by the Serious Fraud Office and by companies and individuals in whom the Serious Fraud Office has taken an interest.
Sadly, the context in which we debate this Bill this evening is the Russian invasion of Ukraine. We are reviewing a Bill that has been passed through the other place in a single day and which will, I am sure, go through your Lordships’ House, if not in a day, quite quickly. Not surprisingly, the criminal and, some may say, paranoid behaviour of Mr Putin in launching this savage attack on Ukraine has led us into thinking that something must be done—and done quickly—to curb the financial freedom of Putin’s benefactors, his nominees and his enablers. These are people who, over the past 25 years, have grown rich through the redistribution to them of what used to be Russian state assets, first by President Yeltsin and then by the current incumbent. They remain rich because Putin permits them to be so, and because they hold vast holdings of valuable property and money throughout the West on his behalf. Although they pretend to be independent operators, they are puppets controlled by a sick and dangerous man, and it is right that our laws do not allow villainy to hide in plain sight.
Two points, however, flow from this. First, although the policy behind the Bill is well understood and universally shared by right-thinking Members of both Houses, the Bill that contains many complicated provisions, which are being considered very speedily. Of course, the war in Ukraine has forced us to act quickly, but the problems caused by passing legislation in a hurry are well known. Although I entirely accept the need for speed, we must be careful that we do not pass bad law which fails to hit the targets that we have identified. As my noble friend the Minister said, another economic crime Bill will be introduced in the forthcoming Session. The Government must stand ready to correct any defects in the current Bill which, through lack of proper consideration, are left in it. I hope it may be used to reform the law of corporate criminal liability—a subject on which I know I must sound like a cracked record.
Secondly, I do not want to be misunderstood in what I am about to say, but we must be careful not to allow our understandable moral indignation to cloud our judgment about what we need to do through this Bill. If there is one thing worse than failing to scrutinise legislation because of haste, it is to pass legislation while caught in a moral spasm. Hard as it is, although I have no doubt that your Lordships’ House and the Government are both capable of doing this, and although it is correct to have a moral purpose behind the policy—here I wholly agree with the right reverend Prelate—we have to pass a Bill now that works effectively for all times and all circumstances against all money launderers, every corrupt actor and kleptocrat from across the globe, not just the Russian ones currently propping up Putin.
Now is not the time to drill too far into the detail of this Bill, nor to lament that, had legislation of this sort been introduced soon after David Cameron’s anti-corruption summit in 2016 or shortly after the work of the Joint Committee on the Draft Registration of Overseas Entities Bill was completed in 2019—I was a member of that committee under the chairmanship of my noble friend, Lord Faulks—we would have considered it in an altogether less fraught atmosphere. That committee made a number of recommendations, which are now in this Bill, but we have lost three years. So I find it a little strange that in the other place Ministers claim to be acting with all due speed. But now is better than next year or never.
Having got that off my chest, I want to pick out a few points from the Bill for later consideration. We need to make sure that, in preventing the criminal concealment of the ownership of property in this jurisdiction, we encompass not only relevant individuals and overseas companies but the owners of shares in those companies, be they individuals, other companies or trusts, and the legal and beneficial owners of the shares. It is not difficult to set up a shell company in an overseas jurisdiction through a nominee. Unless the Bill and those tasked with enforcing the law, once enacted, can get to the actual owner, as opposed to being blocked through a series of impenetrable veils, we will get nowhere.
If what the Government want, as suggested in some government statements, is to reveal the real identities of foreigners who own UK property, we need to ensure that the Bill will achieve precisely that. The legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property. By Clause 33(1), the Secretary of State may by notice require an overseas entity to apply for registration in the prescribed manner within six months.
I agree with the concerns of the noble Lord, Lord Vaux, about the timing issues and the need to register entries on to the register, and I also agree with the noble Baroness, Lady Kramer, on the reduction of the 18-month period to six months. The Government should urgently take accountancy, legal and other professional advice about whether even six months is too long. Nowadays, money flows around the world at the press of a computer button. Should we not think of a far shorter period, with discretion for the Secretary of State or the High Court to extend that period on reasonable grounds in an individual case?
Unexplained wealth orders have not worked as well as they were expected to when they were introduced. Clause 53 allows for urgent designation of named individuals in certain circumstances. I hope the necessary work has already been done, because it may be that many such designations will need to be made immediately on Royal Assent. I have no doubt that the people we want to target will already have anticipated the Minister, and only the unwary minnows will end up being subject to these orders.
Finally, I need convincing that Companies House is the right body to enforce the provisions relating to the registration of overseas entities. It is essentially a recording organisation, a keeper of information provided to it by others. It is not, or not notably, an investigating or prosecuting body, but if it is to have this work, it will need a large injection of specialist staff from the Treasury, the sanctions sections of the FCDO, the National Crime Agency, the City of London police, which is the lead police force in relation to economic crime, and the Serious Fraud Office. It will also, I dare say, need to take additional advice from the security services, and all those agencies will need to be properly resourced to assist in this work.
The Bill must pass, but we must not think it answers all the questions that money launderers and other economic criminals will throw at us. If it assists us, even if indirectly, to get the Russian army out of Ukraine and persuade those supporting Putin to think again, it will most certainly have achieved some good.
Lord Eatwell (Lab)
My Lords, a considered assessment of this Bill requires some reflection as to why measures to thwart economic crime have failed so dismally up to now. At the centre of the Bill stands the registrar, embodied in Companies House. It is Companies House that is the prime source of the failings that have made London the money-laundering capital of the world. One of the political pantomimes of the last 10 years has been the spectacle of Conservative Prime Ministers referring regularly to the register maintained by Companies House as a gold standard, a beacon of openness, an example to the rest of the world. In reality, the manner in which the register is constructed has been and remains the key element in the inability of this country to stem the inflow of dirty money and the total failure to slow the growth of economic crime.
As has been known for years, the scandal derives from the fact that Companies House does not verify the beneficial ownership of the companies registered. Companies House is a library in which any shameful book can be deposited, as the noble and learned Lord, Lord Garnier, has just argued. That so many shameful books have been deposited is a matter of record. By the way, Companies House has led one prosecution in 150 years. That was of a person who deliberately registered a false company in the name of government Ministers to show how hopeless Companies House was at verifying the data. It then prosecuted this man when he owned up to what he had done.
Today, the Companies House register includes about 4.5 million UK businesses, but it operates in much the same way as it did 150 years ago, meaning that criminals have been able to set up seemingly legitimate shell companies without even the most basic identity checks. A study by Professor Jason Sharman of Cambridge University found that it was impossible to establish a shell company in the Cayman Islands, the Bahamas or Jersey, but easy to do it in London. A further study by Transparency International, in November 2020, reported that British shell companies were implicated in nearly £80 billion worth of money-laundering scandals. On top of that, the anti-corruption group Global Witness reported in 2019 that more than 336,000 companies on the register did not disclose their beneficial owner. It also found that just over 2,000 company owners were actually directors who had been disqualified, yet they were accepted by Companies House. It is this same organisation that we now ask to do more: to manage the new register of beneficial ownership of real property envisaged in the Bill.
In assessing whether Companies House can actually do the job, it is important to dismiss the comfortable fantasy that an open register provides sufficient scrutiny to detect wrongdoing. Protection against even moderately sophisticated financial crooks is provided only by verification and regular reverification of beneficial ownership by skilled forensic accountants. This fact was acknowledged by the noble Lord, Lord Callanan, in his foreword to the September 2020 White Paper Corporate Transparency and Register Reform—note that this was a document published two years ago.
The section on verification is to be found in Clause 16. Clause 16(1) refers to verification of information before an application is made by the overseas entity—that is, before the registrar is even aware of the application. I am sure that noble Lords have noticed that the wording of Clauses 4(1)(c), 7(1)(d) and 9(1)(e) indicates that the task of verification is assigned to the overseas entity. The Government may take some comfort from that, but I assure them that I do not. Clause 16(2) refers to
“the person by whom the information must be verified”,
and
“evidence or other information to be delivered to the registrar”.
Again, this suggests verification by a person other than the registrar, Companies House, to which the information is to be delivered, all ready, tied up with a fancy ribbon and a label reading “Nothing to see here.”
Nowhere in the Bill can I find a statutory obligation for the registrar, Companies House, to verify the data submitted to it. The Institute for Government has noticed the same omission, saying that
“without strengthening the organisation—expanding its powers of inquiry and resources to investigate and remove false information, and requiring mandatory identity checks on those incorporating companies, on company directors and on those who ultimately control companies—the new register could have little impact.”
There is also a clear suspicion that the Government are not willing to provide the resources the job requires, as the noble and learned Lord, Lord Garnier, pointed out earlier. To quote the Institute for Government again:
“the provisions in the new bill will make little difference unless authorities are provided with additional resource to enforce them … the UK already has strong tools to target illicit funds but law enforcement agencies have struggled to make full use of them because of resourcing issues.”
In her introduction, the Minister informed the House that a new economic crime Bill, including reform of Companies House, will be brought forward in the next Session. This has been promised time and again by this Government: it is always in the next Session—and the next Session never comes. On verification, we must act now. Making the verification of data by the registrar a statutory requirement is essential if the Bill is to be a meaningful measure and not just another PR exercise. Without a statutory requirement for verification by the registrar, and without the resources to do the job, this House will be participating in a sham. We must ensure that this is not the case.
Lord Carlile of Berriew (CB)
My Lords, it is a pleasure to follow a speech of such forceful clarity as we have just heard from the noble Lord, Lord Eatwell. I should start by declaring my interests. The first is similar to those declared by the noble and learned Lord, Lord Garnier, as a practising barrister, although these days I do not do contentious advocacy in courtrooms. The second is that I am the director of a consultancy company that provides advice to foreign entities and foreign individuals—although, I hasten to add, not Russians. I shall say a little about the sort of interests that arise in a few moments.
In ordinary circumstances, I suspect that many of us in your Lordships’ House would be reluctant to support a Bill such as this without the normal debating time that we are given in conventional legislation. A high degree of trust is being placed in the Government to ensure that the Bill reaches the statute book fit for purpose and is applied in a way that means it will bite. However, we are in extraordinary circumstances. There is no doubt that the war being conducted by President Putin, and indeed Russia, against Ukraine is funded at least in part by the product of money that has passed, and passes, through the United Kingdom, and that it is in many ways money that has been obtained illegitimately through the plundering of the public purse of Russia.
That is brought into high relief today by the news that the Mariupol children’s hospital was bombed by the Russians, including its maternity unit, and the photographs of what is left are terrifying and ghastly. Russia has now become a clear enemy of international law, and its agents, including its oligarchs, have no right to expect us to apply in full our normal ethical legal standards to their behaviour, as in their complicity with the Russian state. Indeed, our prime task, alongside doing whatever we can to assist Ukraine, is to protect our own country, the United Kingdom, against being used as an unwitting instrument of international crimes against humanitarian law.
I shall start in substantive terms by referring, as others have, to unexplained wealth orders. I echo what was said by the noble and learned Lord, Lord Garnier, and my noble friend Lord Vaux in their very eloquent speeches. UWOs have been around for a long time but it is a fact that very few proceedings have been taken by the National Crime Agency. There have been four cases, of which one failed. I can tell your Lordships that around the members of the legal profession that I speak to, and there are many on a daily basis, there is astonishment that the NCA has not brought scores of applications to court for UWOs. The reason for that is plain and twofold: one is the risk of costs, which can be dealt with, but the other, which is more difficult to deal with, is that the NCA is simply horribly understaffed to deal with these cases. It is not that there are not people who could do it, but we have to commit to employing those people and they have to be of sufficient quality. They need to be good lawyers and good investigators so that we are not standing here in a few months’ time saying, “The NCA really hasn’t been effective”.
Then, as the noble Lord, Lord Eatwell, referred to, there is the role of Companies House. It just so happens that professionally, in my consultancy company, I made an application on behalf of a client to Companies House some weeks ago now, in full detail, for a company to be deregistered. The evidence in the case could not be clearer. The company concerned is an impostor; it is pretending by its name and its fraudulent activities to be a very great international entity, but it is not—it is just a bunch of fraudsters. It is probably six weeks since I sent that application to Companies House. It is not just that they have not done anything; they have not even acknowledged—apart from the most formal immediate acknowledgment—the receipt of the application that I put in on behalf of my client. So I am absolutely with the noble Lord, Lord Eatwell: Companies House either is not fit for purpose or has to wake up and achieve that part of its purpose. Companies House, like the NCA, needs the staff to deal with these issues because it does not have them.
I have two other substantive points. The first I raised in the debate on Ukraine on 28 February, which was answered clearly, eloquently and helpfully by the noble Lord, Lord Ahmad of Wimbledon. My point relates to law firms and, indeed. other professionals—I deliberately turn to a chartered accountant when I say that—who, mostly in perfectly proper circumstances before this conflict arose, without any breach of law or ethical standards, have been involved in actual or intended transactions that may well have brought financial benefit, and therefore belligerent facilitation, to the Russian state. Some of those are property transactions, although not all, and some are transactions that are worked on but not fulfilled. A great deal of work is going on in law and other professional firms in relation to transactions that benefit the Russian state and it could tell us a great deal about what the Russian state is doing, as well as revealing criminal activity. I hope there is no single lawyer in the UK, whether in the square mile or elsewhere, who would find it ethically acceptable to bring benefit to an enemy of the United Kingdom, but the opacity of the sorts of transactions that I am describing means that lawyers and other professionals may well be complicit—entirely unintentionally, although there are of course rogues in every profession—in the sorts of transactions that I have referred to.
It is important that legal professional privilege should continue to apply to legitimate transactions. I hope that no one in this House wants to wipe away legal professional privilege in a transaction because someone happens to be a Russian; after all, there must be some very respectable Russians around because quite a lot of them have given money to one of the major political parties in this country. I hope that will not be taken amiss, but as far as I can tell it is true. So how do we achieve the scrutiny of such transactions?
After the debate on 28 February, I wrote to the noble Lord, Lord Ahmad—I have not heard from him yet but this was very recently so I would not have expected a reply—suggesting that we should adopt the architecture of the National Security and Investment Act 2021, an architecture that is now up and running in, among other places, the Ministry of Defence, with a substantial group of people working on it. They are applying the national security principles, the 17 national security categories, that are exactly relevant to the sorts of transactions that I am referring to. I respectfully suggest to the Government that they should adapt the NSIA architecture to a register of transactions by lawyers that lawyers and other professionals would have to report in clearly described circumstances, even though legal professional privilege would continue to apply as an inviolable principle unless there was an effect on our national security, as described in the NSIA. It seems to me that that sort of architecture would satisfy what is in my view a need for professional firms, if they participate in transactions that now seem to be politically dubious apropos the Russians, to be examined.
The other issue I wish to raise is about non-Russians who own property in London. A significant number of special purpose vehicles have been created for well-known foreign people to purchase. These people are huge investors in this country—entirely honestly, in good faith and with strong ethical standards—who do not wish it to be known that they, as individuals, are the beneficial owners of those properties. They have good reasons. One good reason, as one might think, is simply to protect their privacy from unwelcome curiosity and criminals. Another possibly legitimate interest may be to protect themselves from unwanted curiosity from overcurious journalists. A third reason, and possibly the most important, is for national security issues—not ours, but theirs for the country in which they live.
I will briefly give a couple of examples. I remind your Lordships of the events of 2 October 2018 when Jamal Khashoggi was murdered in Istanbul by agents of Mohammed bin Salman and the Government of Saudi Arabia. This is an example of a Government finding out everything they need to know so that they can take out an enemy of the state in completely unlawful circumstances—in a friendly country—through an outrageous and brutally executed crime. People are entitled to defend themselves against that, as are the victims of Russian-led incidents. On 23 November 2006, in Bloomsbury, just yards from my own office in Gray’s Inn Square, Alexander Litvinenko was taken out by the Russians. By whose agents was he murdered on our territory using radioactive material? Vladimir Vladimirovich Putin. Perhaps we should have been warned then. Afterwards, there were the shocking events which took place in Salisbury and affected life in one of our most beautiful cities.
When he replies, I would be grateful if the Minister could confirm that, when registration is required, the legitimate privacy and interests of good foreign investors will be protected under the provisions of this Bill, particularly Clauses 21 to 25.
Finally, I apologise for not being able to be here next Monday when the Committee takes place. This is because I have a long-standing commitment aboard, otherwise I would have come to contribute further.
Lord Thomas of Gresford (LD)
My Lords, for over 50 years, it has always been a privilege and a pleasure to speak either before or after the noble Lord, Lord Carlile.
Last Friday, the Guardian reported that the Foreign Secretary, Liz Truss, has asked government lawyers to “find literally any way” to crack down on SLAPPs—strategic lawsuits against public participation. On the same day, Reuters reported the view expressed by a number of Members of Parliament, including Conservative MPs, that British sanctions on Russian oligarchs are being partly delayed over concerns that wealthy businessmen will take the Government to court unless they have built solid legal cases against those targeted. As the noble Lord, Lord Carlile, pointed out, they do not have the cash—or the organisation within the police departments which deal with this—to do that. I ask the Minister: does this account for the Government dragging their feet on sanctions—particularly now, as others have already mentioned, that they are giving six months to Russian oligarchs in this country to liquidate their assets? I regret that the Government have not taken the opportunity in this Bill to deal with the urgent problem of SLAPPs; nor was it in the list announced for Part 2 by the Minister.
The British justice system is undoubtedly not world-leading in this area. Other common-law countries, including the United States and Canada, have brought in anti-SLAPP laws which enable a journalist or publisher to apply to the court at an early stage for a law suit to be dismissed, if it relates to content which is in the public interest. Consequently, the Foreign Policy Centre has described the UK as
“the most frequent country of origin”
for foreign legal threats against investigative journalists. The journalist Catherine Belton wrote a book called Putin’s People: How the KGB Took Back Russia and Then Took on the West. Among other things, she wrote that sources had informed her of Putin’s plan to acquire Chelsea Football Club through Abramovich to increase his influence and to raise Russia’s profile, not only with the elite but with the British people. If that was his plan, the chanting of Chelsea supporters last weekend, interrupting the applause for Ukraine at Burnley, shows that Putin has succeeded in his object. Putin has succeeded in distorting British values of freedom and democracy, at least among Chelsea fans. Catherine Belton’s book was highlighted by the opposition leader Alexei Navalny from his prison cell in January last year when he revealed, among other things, that Putin secretly owned a £1 billion Black Sea palace. She was hit with libel actions from Abramovich, who was quickly joined by other oligarchs and the leading state oil company, Rosneft. Abramovich also sued her in Australia, where the book had been published. Miss Belton’s publishers, HarperCollins, stood bravely by her. The result of this hugely expensive litigation was some minor alterations to a few sentences in her book without the payment of any damages or costs. Another similar case was brought against the Financial Times investigative journalist Tom Burgis by the Kazakh mining company ENRC. As my noble friend Lady Kramer said, there are enablers. Solicitors for the oligarchs in this litigation include the well-known London firms Mishcon de Reya, Schillings, Harbottle & Lewis, CMS and Carter-Ruck.
I have answered Ms Truss’s call by drafting a Bill which is currently in the queue for a First Reading in this House. I am very happy to share this with the Government at this early stage. It is based on the Ontario legislation which was recently considered and approved in the Supreme Court of Canada. Essentially, my Bill provides for a defendant to apply to the court at an early stage to dismiss the proceedings where the judge is satisfied that the proceedings arise from a publication relating to a matter of public interest. It is then for the claimant to satisfy the judge that the proceeding has substantial merit, and that the public interest in permitting the proceedings to continue outweighs the public interest in protecting the publication. In weighing the public interest, the judge may take into account a variety of factors, including the chilling effect of the proceedings on any future investigative journalism and any disproportion between the resources deployed and the amount of damages likely to be awarded. The judge would have power to award damages to the journalist or publisher where he concludes that the proceeding has been brought in bad faith or for an improper purpose. I had thought of seeking to amend this Bill with these provisions, but I do not think they would come within the Long Title, nor would there be time—as the noble Lord, Lord Carlile, said—to adequately debate them. But this is a way to crack down on this abuse of our judicial system, and I look forward to the Government giving time for my Bill, or their own time to deal with the matter.
Lord Rooker (Lab)
My Lords, I very much agree with the contents of virtually all the speeches we have heard so far. The right reverend Prelate the Bishop of Leeds said that he wanted to introduce some ethics into the debate. I deeply regret that before I finish I shall introduce some politics into it. The constant theme in the House of Commons on Monday was that alarm bells have been ringing for years and been ignored by the Government. It is sad to say that this is an entirely fair point to make. I shall therefore go through a bit of the history. I make no apology for saying “I told you so”.
In March 2015, Transparency International published a detailed analysis, Corruption on Your Doorstep: How Corrupt Capital is Used to Buy Property in the UK. I will not go into any of the details given there but the Government knew about it because I initiated a debate on it on 18 June 2015. The present Government Chief Whip replied.
Another alarm bell around the same time was rung in the Financial Times on 6 June 2015, when it reported that more than half the homes costing £1 million-plus were being bought with cash. The newspaper reported that 76% of the most expensive homes costing above £5 million were paid for by entirely by cash. Alarm bells?
In Singapore in July 2015, the then Prime Minister made what I have said previously was a seminal speech on corruption, which was never really followed up with action, even though that Prime Minister said in his 2017 lecture on corruption that he thought action was being taken forward. He was taken in.
In early 2016, Roman Borisovich launched the Kleptocracy Tours. The idea was to show people what it was all about—to visit locations and explain about the owners, or what was known about the owners, the lavish properties and something about the sources of wealth. That was before the emergence of unexplained wealth orders, a matter raised in the original Transparency International report. The tours started in Whitehall and went through Knightsbridge, South Kensington, Hampstead, Highgate and so on.
I shall highlight just two examples and I shall do so because I have done it before—at least four times. There is no argument about what has been going on and been ignored by the Government. The start was outside the Igor Shuvalov’s property at 4 Whitehall Court, which are two apartments, now knocked into one—138a and b—and are above the Farmers Club for those familiar with the location. This apartment was worth more than 80 times Mr Shuvalov’s annual income as a Russian government official. Due diligence there was none. The extract from the Russian registry of companies disclosed the beneficial ownership of Sova Real Estate by Shuvalov and his spouse. The purchase price of £11,440,000 is well known. The lender: none. The London end was cared for by Tulloch & Co of Hill Street.
My other example is relevant for two reasons. The person is Ukrainian and the sellers of the property were the UK Government. There is much more detail. When I prepared this speech, I saw the “Long Read” in yesterday’s Guardian by Oliver Bullough, so the details are there. It relates to a property that I have driven past for decades on my way here—a dwelling attached to the old Brompton Road Tube station. Dmytro Firtash paid over £100 million for it. He made his fortune selling Russian gas to Ukraine. He was living in Austria fighting extradition to the United States on bribery and racketeering charges. That continues today.
The matter is relevant because the Tube station closed in 1934 and during the war was used for various matters related to the Anti-Aircraft Brigade. In 2014, while Mr Firtash was still in Austria fighting the extradition charges, the owner of the site—the Ministry of Defence—sold it to him. He claimed that he wanted to convert it to residential use. He paid £53,375,000 to the Secretary of State for Defence. The property now still appears to be three separate buildings but is in fact one. In June last year, according to Reuters, the Ukraine Government headed by President Zelensky imposed sanctions on Firtash for selling products that ended up being used by Russian military enterprises. Did the MoD do any due diligence before the sale of its property? It was known that Firtash was in Austria—he was not living there. I asked about this some years ago and was simply fobbed off.
I should say in passing that the tour went past the house of Roman Rotenburg, owned through a Cypriot company. He received his father’s and uncle’s sanctioned foreign assets in 2015. I mention that only because others in this House are more capable than me of explaining the background, although they are not here tonight.
If the Government are still pleading ignorance, in 2018 along came Moneyland by Oliver Bullough. I will quote a brief extract from the flyleaf, which states:
“Once upon a time, if an official stole money, there wasn’t much he could do with it. He could buy himself a new car or build himself a nice house or give it to his friends and family, but that was about it. If he kept stealing, the money would just pile up in his house until he had no rooms left to put it in … And then some bankers in London had a bright idea.”
These matters and other examples were raised again and again, especially during the passage of both the Criminal Finances Act 2017 and the Sanctions and Money Laundering Act 2018. So why has no action been taken until Ukrainian blood is being spilled at the level it is today? The Bill is a token because it has been brought about only because of that. The issue was always there anyway. Our economy is being distorted at a crude level because if half the money disappears all at once it will be highly damaging. But we knew that because we knew that the money was coming in.
The impact assessment for the Bill, which the Minister signed on 25 February 2022, on page 5 uses as a reason for action the very report from Transparency International in 2015 that I mentioned at the start. That was seven years ago. The impact assessment to justify the Bill is based on something that the Government knew about seven years ago and has been repeatedly raised with them—but they did nothing about it.
I am not going down the road of the former Prime Minister, when Home Secretary, refusing the inquest into the death of Alexander Litvinenko because of “international relations”. Then there is the present Prime Minister, who is so close to the Russian KGB family that he dumped his security detail to go to meetings and parties—one of which was the in the week of the first Covid lockdown in March 2020. Missing five COBRA Covid meetings was okay because the top priority was to report to the Russian he could not get into this House at the time.
The common theme is the active involvement of both those top UK Government members in fundraising events—all on the record—to obtain Russian-based money into the Conservative Party. This has spread to many other Ministers. I cannot understand it. Constituency parties in this country have received donations from people who are living here legitimately and are on the electoral register. Did those constituency parties not ask why this money is coming in? We do not really need to ask any more, do we?
Lord Faulks (Non-Afl)
My Lords, I am not sure I can follow that. I should declare an interest as a practising barrister, but not one with any relevant interests so far as this debate is concerned. We of course understand why the Bill is being rushed through Parliament, but I fail to understand why the Government have taken so long to respond to what was staring them in the face.
To take up the story from the noble Lord, Lord Rooker, I was excited by the Criminal Finances Bill in 2016. It borrowed ideas from other jurisdictions but did not, in my view, go far enough. The noble Baroness, Lady Williams, not currently in her place, will recall the criticisms I offered then of unexplained wealth orders and of the omission altogether of a property register that would help to identify the true owners of choice London property. My amendments were not accepted by the Government. Sadly, not many in your Lordships’ House, with notable exceptions—I see some of them here today—seemed particularly interested in that Bill.
Then came the Sanctions and Anti-Money Laundering Bill in 2018, which attracted rather more interest—although most noble Lords seemed concerned to protect those who might be capriciously or unfairly sanctioned. The noble Lord, Lord Hodgson, and I put down amendments in 2018, once again to set up a property register—mysteriously omitted from the Bill. I was prepared to vote against my own party on this. I was placed under considerable pressure to withdraw my amendment. I was told, among other things, that it was too complicated to do in the 12 months I suggested in the amendment. I was given lavish assurances by the Government, and a timetable. Neither the assurances nor the timetable were adhered to.
In the meantime, other noble Lords had rather more luck with their amendments to the Sanctions and Anti-Money Laundering Bill. The noble Lord, Lord Pannick, who has recently been much criticised in the newspapers, and the noble and learned Lord, Lord Judge, put down amendments that were in fact perfectly conventional, rule-of-law safeguards. They were supported in those amendments by the Labour Party and the Liberal Democrats. In fact, the Liberal Democrats wanted to go further; it seemed to me that the effect of one of their amendments would have made areas of our foreign policy justiciable. This is partly explicable by the fact that the debate on these sanctions came immediately after Brexit, and everybody’s minds, at least for the most part, were not directed towards Russia.
In Committee and on Report I spoke against all the amendments. It was not that I wanted arbitrary imposition of sanctions, but it seemed to me that our foreign policy needed a degree of flexibility. It must be remembered that sanctions are essentially a tool of foreign policy. The Government were wrong to compromise, as they did, in relation to these amendments. The position now, of course, is that the oligarchs we wish to sanction will have the benefit of the finest legal minds that money can buy to represent them.
I recommend that noble Lords read pages 46 and 47 of the Explanatory Notes to the Bill. They are certainly the longest Explanatory Notes I have ever read in relation to the European Court of Human Rights. It seems to me that the civil servants advising the Minister have said that, as a result of the amendments to the Sanctions and Anti-Money Laundering Act and elsewhere, it will be very difficult indeed to sanction anybody. Paragraph 230 says that Part 3 of the Bill
“potentially engages the following provisions of the European Convention on Human Rights: Article 6 (right to a fair trial), Article 8 (right to respect for private and family life) and A1P1 (respect for peaceful enjoyment of possessions).”
I am sure we all hope that the oligarchs can have peaceful enjoyment of their possessions. The European Convention on Human Rights was not designed to protect people like them.
I hope the Minister can assure me that the government amendments will be enough to defeat the legal might of the oligarchs. In this context I recommend the suggestion made by Professor Ekins and Sir Stephen Laws in their Policy Exchange paper, published this week in the Spectator, about a way of doing this without encountering some of the difficulties I foresee.
On the subject of the Human Rights Act, in 2015, together with the now Deputy Prime Minister, I was given policy responsibility for a British Bill of Rights. It never saw the light of day, despite our best efforts. In your Lordships’ House I was regularly upbraided at the Dispatch Box for even contemplating an amendment to the Human Rights Act, let alone leaving the Council of Europe. I was told it would send a bad message to Russia and Belarus as fellow members. We are still members of the council, but it does not seem to have much inhibited Russia or Belarus as they trample over the human rights of the brave people of Ukraine.
Then there was the Joint Committee, which I was privileged to chair, with the noble and learned Lord, Lord Garnier, as a member. It was entirely apolitical in the sense that all parties agreed to a number of important things that we thought could be done to the draft Bill, including verification—already much mentioned—and trying to get rid of the problems of trusts that could be used to bypass some of the protections. We stressed how important the timing was and how urgent it was. The timetable is in fact recorded in our report—a timetable not adhered to by the Government.
We have allowed ourselves to be the receivers of stolen goods in this country. We have seen the murder of Litvinenko and the Salisbury poisonings. Reputable sources suggest that as many as 10 or more murders are attributable to Russia. Ukraine is not our fault, but we have embraced the Russian oligarchs and Putin’s henchmen.
The Explanatory Notes say the Bill has been introduced as part of Her Majesty’s Government’s
“urgent response to the Russian invasion of Ukraine.”
It contains some useful provisions, which I thoroughly support and which can no doubt be improved when the next Bill comes along. But it should never have been necessary to come to this.
Lord Hannay of Chiswick (CB)
My Lords, the Bill we are debating today is long, long overdue. Part of this delay resulted from the shameful decision to block publication of the report produced by the Joint Committee on Intelligence and Security on Russia’s activities in this country. Whatever excuse was dreamed up to justify that delay, it can now be seen as a blunder and as being responsible for the fact that in this instance the UK is not, as the Government like to claim, a world leader but rather a “world catcher-up”, well behind the US and the EU.
However, it would be wrong not to welcome the Bill’s likely passage into law later this month—all the more so as during my intervention in the emergency debate on Ukraine on 25 February, the day after the Russian invasion, I called for the Bill to enter into force during this Session of Parliament and not the next. This will now happen, and it is right to applaud that, as well as the announcement today of a further Bill for the next Session to go into greater detail. But, since speed is of the essence, it would surely make sense to cut the six months allowed for registration to a figure close, or at least closer, to the 28 days suggested in the other place. Surely the Government could accept some compromise on that.
Legislative action of the sort proposed—the sort we are debating this evening—is only a first step in a complex operation. Of far greater practical significance will be the skill and energy with which it is implemented and enforced once it is on the statute book. I hope that when the Minister replies to this debate he can assure the House that serious and detailed preparatory work is already being put in hand, so that action under the new law will not be unduly delayed. Will he also undertake to keep Parliament regularly informed of progress in enforcement if and when the Bill becomes law?
Of course, the Bill is about more than just bringing to book Russian institutions and individuals linked with illegality in general, and in particular with the war crimes being committed daily in Ukraine by the Russian state. It is another very necessary step in the battle against corruption worldwide, which began promisingly —if, again, somewhat belatedly and after considerable delay—with the Bribery Act. Like this Bill, that Act recognised that corruption anywhere in the world invariably involves more than one person or entity, and that the proceeds of corruption often end up an awful lot closer to us than we would wish.
It is all too easy to comfort ourselves with the thought that most corruption occurs somewhere else, often thousands of miles away, and has nothing to do with us—easy, but wrong. This Bill should provide a shot in the arm for the battle against corruption, which is a proclaimed and worthy objective of successive British Governments but has so often fallen short in the execution; just look at the reports of Transparency International if you doubt that. Russia’s aggression against Ukraine, in contravention of its international obligations from the UN charter onwards, is a salutary reminder of the urgent need for us to defend the rules-based international order.
This Bill is part of that defence but mere words will not be enough, especially as, only yesterday, on our Order Paper was another Bill—the Nationality and Borders Bill— that seeks to allow the Government to act in contravention of the 1951 refugee convention. It is, frankly, Orwellian to assert that Parliament alone has the right to interpret what is and what is not in conformity with the convention. That is the language of President Putin and not ours.
Lord Londesborough (CB)
My Lords, as we know, Russia’s invasion of Ukraine has triggered the fast-tracking of this Bill to address the burgeoning and multifaceted industry of economic crime. If this Bill is viewed as a quick fix to address the UK’s shameful and enabling embrace of corrupt oligarchs, we should note that the so-called London laundromat has also been exploited by kleptocrats across a wide range of nationalities, not just Russians.
The British sense of fair play is an expression we hear less of these days. That is not hard to understand when you read the Treasury Select Committee’s somewhat embarrassing but honest sizing up of economic crime in the UK:
“It seems that it can reasonably be said to run into the tens of billions of pounds, and probably the hundreds of billions.”
The actual cost to the UK economy of serious and organised economic crime is conservatively estimated at £37 billion per year. That is more than three times the expected increase in revenues generated by the new rise in national insurance contributions.
Given the urgency, this Bill is necessarily narrow in scope, with a focus on the registration of overseas entities and land and property ownership. However, as we know, UK service firms and their clients have been involved in a whole range of enabling activities across numerous sectors, including banking, private company investment, consulting and advisory services, estate agency, sportswashing and lifestyle management.
This Bill seeks to address the troubling issue of unexplained wealth given that we have become a magnet for rich businessmen from poor countries with abnormal levels of wealth. I include Russia as a poor country; last year, its GDP per capita was just over $11,000 and it was ranked 85th in the world. This year, it is likely to fall below 100th, yet it boasts 117 billionaires; that is the fifth-highest number in the world. My point is that you do not need to be a forensic economist to spot unexplained wealth.
I witnessed this at first hand 15 years ago. A Russian media company launched an unsolicited takeover offer for an information business that I was running at the time. The offer was way in excess of the fair market value and the company conducted zero due diligence. We resisted after discovering that our suitor had powerful political connections in both Moscow and Beijing, and had a seemingly bottomless war chest despite never having generated a penny of profit in its history. The most unedifying site was the long line of British advisers, lawyers and accountants acting on its behalf. I see much in this Bill aimed at the sources of dirty money but little to address the enablers.
Turning to the Bill’s specifics, I have four brief points to make. First, as many noble Lords have already pointed out, shortening the transition period for overseas companies to register their beneficial owners from 18 months to six months is inadequate. I suggest that three months strikes the right balance between urgency and the important aspect of allowing bona fide beneficiaries the time to register.
Secondly, fines need to be proportionate and a deterrent. The average property transaction value for oligarchs in the UK is around £15 million, so fines of £500 or £2,500 a day are insufficient. I suggest that, for the first day of contravention, a fine of around 1% of the property value would be more appropriate.
Thirdly, I am an entrepreneur, not a lawyer, but the drafting of the overseas property legislation seems to need tightening up. I believe that individuals would still be able to hide their true identities through nominee agreements with professional service firms. Closing the “no person of significant control”, or PSC, loophole is another key priority.
Finally, as many noble Lords have pointed out, enforcing the new rules of the Bill requires proper resourcing. Our spending for national agencies fighting economic crime is around £850 million per year, set against the money laundering cost to the UK economy of perhaps as high as £100 billion. No wonder conviction rates have been so low.
This Bill is far from perfect but I will support it, mindful that the Government are planning to bring in a second economic crime Bill in the next parliamentary Session that should—indeed, must—address the many other issues of a complex and menacing industry.
Viscount Colville of Culross (CB)
My Lords, I was the BBC’s Moscow producer for “Newsnight”. I have been back many times to make television programmes in Russia. Throughout that time, Russians often spoke admiringly of the UK as a bastion of political stability and democratic freedom. It is ironic that the British ideals and institutions they so admire have been repeatedly traduced by the Russian elite. Few Russians have had the political influence and absolute ruthlessness to become oligarchs, but they have been drawn to the great honey pot of the City of London to hide their wealth and live lives of unimaginable opulence. Many are people who surround Putin.
They live in stark contrast to the vast majority of Russians, who are desperate pawns in his heinous plans. As if proof was needed, only yesterday, the mothers of Russian soldiers fighting in Ukraine told how their sons had been forcibly signed up to the army for a salary of £180 a month—a subsistence wage that barely helps you live in rural Russia. They even had to buy their own uniforms. One mother said that she had a text from her son Nikolai two weeks ago saying that he was on a drill and was going to continue drilling. Since then, she has not heard from him and fears the worst.
I am pleased that our Government have started to sanction Putin and the elite who surround him. I hope that this Bill will be used to extend sanctions to at least 1,000 people around Putin—not just Ministers but members of the Duma, all the military and security service leaders and, most importantly, their families. Putin does not care what happens to the people of Russia but he does care about what happens to those around him. I, like many noble Lords, welcome the Economic Crime Bill and add my calls for its companion Bill to follow shortly.
According to Transparency International—it has been mentioned many times in this debate—hundreds of oligarchs from around the world own property in the United Kingdom, many of them Russians. If you count corrupt politicians and public officeholders, the figure is higher. The NGO calculates the known value of assets in the UK bought with suspect wealth to be at least £6.7 billion, although it adds that this is likely to be the “tip of the iceberg” given how little we know.
I welcome the property register of oversea entities set out in this Bill. It is good to know that the United Kingdom Government have finally decided to track down the beneficial owners of so much property in this country. My concern is that much of it is held by companies registered in the Crown dependencies and overseas territories.
The sanctioned oligarch Alisher Usmanov, said to be worth £13.4 billion, bought the grade 2 listed Beechwood House in Hampstead in 2008 for £48 million. It is owned by a company called Hanley Ltd, based in the Isle of Man. Likewise, the industrialist Oleg Deripaska, who is sanctioned in the United States—but not yet here—for close links to President Putin, has a multimillion house in Belgrave Square. It is owned by Ravellot Ltd, registered in the British Virgin Islands. Transparency International estimates that £1.5 billion-worth of London property is owned by Russians, 55% of it registered in the CDOTs. I am pleased that the new register will identify the true beneficial owners but, like my noble friend Lord Faulks, I am concerned about what happens if they decide to sell the company’s shares to a new owner, possibly another friendly oligarch. The new beneficiary will have to be notified in the register, but only during the annual update. That gives the original beneficiaries plenty of time to salt away their wealth from the shares they have sold. I ask the Minister to consider more frequent updates of true beneficiaries on the register.
The registers of companies established in the CDOTs allow UK authorities only to make a search on individual companies, but many oligarchs and money launderers hide their money in a web of companies. The only way this can be uncovered is for the Government to request full access to their registers so that authorities can take an overview and piece together the web. At present, the registers will be open in over 21 months’ time. Some overseas financial centres such as the BVI, however, already have a professionally maintained up-to-date BOSS register. It would take only a short time for that to be made public. I ask the Minister to ensure that the Government do everything in their power to open these registers this year and uncover the truth about the wealth of so many Russian oligarchs, including Putin and his friends.
The other area which concerns me is the huge growth in SLAPP orders, so eloquently described by the noble Lord, Lord Thomas of Gresford. Recently they have been used aggressively by oligarchs and corrupt players around the world to close down exposure of their wealth and, in the case of many Russians, their links to the Kremlin, by journalists and writers in this country. I am proud to have helped shape the Defamation Act 2013. Its threshold of a publication that
“has caused or is likely to cause serious harm to the reputation of the claimant”
was successful for a time in controlling libel tourism. But new threats of defamation, breach of privacy and data protection are being used by British lawyers to intimidate journalists and writers. These cases can be time-consuming and costly, involving an expensive and lengthy disclosure process, continuing for many years and dragged out by rich claimants. The noble Lord, Lord Thomas, mentioned the cases of Catherine Belton and Tom Burgis, to name but a few.
In researching this speech, I have spoken to a number of journalists writing about Russian wealth, who have received very aggressive legal letters. Not only do they threaten a list of legal actions, but even the letters themselves are secret. The recipients were threatened with actions for breach of confidentiality or even copyright if they made the letters public. I have obtained one such letter from a leading London law firm to a freelance journalist who exposes corruption on a regular basis. They were threatened with breach of privacy and given severe warnings against mentioning the law firm unfavourably. I fear that these SLAPP orders pose a chilling effect on free speech in this country. During the debate on the Bill in the other place, the Minister announced that Dominic Raab has made a call for evidence. I hope that this includes setting up a bespoke judicial mechanism tailored to look at these orders at an early stage to decide whether publication is in the public interest. I also support the noble Lord, Lord Thomas, if his Private Member’s Bill comes before the House. Meanwhile, can the Minister confirm the scope of this call for evidence and when it might conclude its findings?
We need to rid this country of its reputation as a safe haven for corruption and criminality. We need to clamp down on the activities of Putin’s people and their families. I look forward to a second Bill coming before the House very soon to close the other glaring loopholes, especially at Companies House.
Lord Rogan (UUP)
My Lords, the scenes in Ukraine that the world has observed in our newspapers and on our television screens over the past two weeks—
Lord Sharpe of Epsom (Con)
I am afraid that the noble Lord was late to the start of the debate.
Baroness Bennett of Manor Castle (GP)
My Lords, I will set out the context for the Bill and look at some of the bigger ways forward, while my noble friend Lady Jones of Moulsecoomb will concentrate more on its details.
Baroness Bennett of Manor Castle (GP)
I am sure she will.
Unoriginally, I begin by noting that a year is a long time in politics. In January 2021, we had Second Reading of the Financial Services Bill in your Lordships’ Chamber. The noble Lord, Lord Agnew of Oulton, was on the Front Bench, proclaiming with apparent pride that the UK had
“unwavering commitment to high-quality, agile and responsive regulation”.—[Official Report, 28/1/21; col. 1810.]
I said:
“We are a major global centre of corruption. The City is an Augean stables and the Bill is clearly sparing in its distribution of shovels.”—[Official Report, 28/1/21; col. 1861.]
It is clear that Greens lead in recognising problems, with others following eventually, and we offer solutions. I have joined many others—I note the leadership of the noble Lord, Lord Wallace of Saltaire, in particular—in calling for an end to golden visas, a long and disgraceful saga threading through Governments of three political hues that eventually, very late in the day, has finally been cut off.
The noble Lord, Lord Agnew, is no longer sitting on the Front Bench. It was the Government’s refusal to tackle another, largely unconnected corruption issue that led to his dramatic resignation. Our issue with corruption is clearly not contained to one sector, area or type. It is a pervasive UK issue.
As a nation, we are today like a guilty individual hastily pushing an illicit lover out of the window of their bedroom as the world’s media comes storming through the front door, this Bill being scanty garments hastily donned in ill order. The world, with its attention focused in particular down the road on the City of London, will clearly not be deceived about our state of disarray. According to the International Monetary Fund, as much as 5% of the world’s GDP is laundered money, and only 1% of it is ever spotted. Collectively, developing countries have lost $16.3 trillion to illicit leakages since 1980. A very significant chunk of that flows just down the road from here. The Thames is dwarfed by a far dirtier and deadlier stream of corruption, as the right reverend Prelate the Bishop of Leeds noted.
It is worth noting that we are here today because of President Putin. His actions forced our Government to react. We should not be reacting; we should have been proactive many years ago. As the right reverend Prelate said, we should not need this spur, yet clearly the Government are like a horse that has been baulking at the gate, not wanting to be pushed away from a lush, tasty pasture even when it has been made deadly ill by the colic of ill-gotten gains.
Colic is not a contagious disease, but our corruption is. Look at how Russia got to the state it is in today; back in the time of President Yeltsin, the guidance for reshaping the post-Soviet economy was largely handed to western lawyers, accountants and businesspeople. The Russians were told that the neoliberal market model was the way forward, and it actively encouraged what amounted to a 19th-century robber baron-dominated wild east, with what had been Soviet-era senior apparatchiks almost seamlessly switching to champions of the market. We still see some of them today, very close to home.
Of course, the oligarchs bear responsibility for their choices and actions, but so do those who encouraged and enabled them. The sicknesses of our society are many. We often talk about our productivity problem and our labour crisis, but what if the bankers, instead of serving the oligarchs, put their talents to optimising the outputs of our manufacturing? What if the accountants were tracking the movements of nutrients and micro-organisms, with the aim of producing good, healthy food? What if the lawyers were caring for our old and sick?
I am indebted to the noble Lord, Lord Sikka—I am very sorry that we will not hear from him shortly—for the figure that there are around 400,000 professionally qualified accountants in the UK. That is the highest per capita figure in the world. We have an economy that focuses on spreadsheets, not on the quality of our society. And what have we done in terms of delivering the rule of law? It is frequently claimed that we are at the centre of the camp defending it, but we have actually been leading its absolute undermining.
A book entitled Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals will be published tomorrow. It is definitely in the contest for the best-ever timed publication of a book. The author, Oliver Bullough, notes that we do not just need changes to legislation—we need changes to enforcement, as many noble Lords have noted, and to culture and politics.
In 2016, the Government estimated that the amount of corrupt money flowing into the UK had reached £100 billion a year, and Transparency International has identified at least £1 billion of suspect property bought with Russian money alone. But the flow is not just of money; of course, there has been a massive flow into the West of Russian oil and gas. The trashing of our planet and our economic and political systems are all intimately interlinked. The impoverishment of many and the destruction of our environment are linked to the benefit of the few.
I have some specific proposals and questions for the Minister. First, will the Government now reconsider their plan for freeports? Studies by the European Parliament and the Financial Action Task Force, among others, have shown that the secrecy and extraterritorial nature of freeports are a magnet for money laundering and tax evasion. These are the kind of things we are supposedly trying to act against.
Secondly, in terms of the Russian targets for these sanctions, we are talking about an opt-in system, identifying those oligarchs that are apparently close to Putin and his regime. Robert Reich, the former US Secretary of Labor and now a professor of public policy at the University of California, suggested the freezing of all offshore holdings of Russian nationals in excess of $10 million. He estimates that this would affect 10,000 to 20,000 Russians—those who, by definition, have benefited most from Putin’s rule. How about an opt-in system instead of an opt-out one?
Thirdly, due to the prod that led us to this Chamber today, we are of course focusing on Russia, but what about many other parts of the world? I think it was the noble Lord, Lord Carlile, who referred to the vicious actions of the Saudi state and our friends in the Middle East and arms customers. What are we going to do to address where Saudi money is in London and where it has come from?
I also stress to the Minister that the problem is not only people in the global south or in places that speak different languages or have different cultures from our own. There are also the tech billionaires and mining magnates, with their overweening wealth, tax dodging and exploitation of their workers. Illegally acquired wealth is far from our only problem. Unexplained wealth orders are meant to tackle that, but I suggest that we also need “all too well explained” wealth orders—you might call it a wealth tax. Many noble Lords have focused on the need to fund far better the enforcement of our laws; perhaps some of the money from a wealth tax could go towards that.
I have a final, practical question. The proposed registration will apply only to property bought in England in the last 20 years, or since 2014 in Scotland. Why not look at what is concealed by previous arrangements? Is it to be considered laundered clean, rather than just more dirty washing? Maybe there is not much desire to go further back. How much of the wealth of people in a place like this has deeply corrupt origins, stolen in the colonial and post-colonial periods?
The Greens can do nothing but support this Bill, which is a small step in the right direction. You can, however, sail even a modestly scaled superyacht through the gaps in it. I thank the Minister and his colleagues for a useful briefing that focuses on the need for a second Bill as soon as possible, but we need much more, and an acknowledgement that the problem is not simply the narrow legal framework, or individuals; the problem is our system.
Lord Cromwell (CB)
My Lords, although it does not say so on the Bill, it was perfectly clear before we even started, and has become manifestly clear throughout, that this Bill is largely about Russia. For that reason, I declare my interest as a director of the Britain-Russia Centre and British East-West Centre, an NGO set up in 1959 during the height of the Cold War. All noble Lords will agree that our disagreement is with the regime and particularly the man who leads it; it is not with the people of Russia, who suffer under that totalitarian system. We need to remember that, because many Russians are fed up with being referred to as “mafiosi” just because of their nationality.
As has been eloquently said by many, this Bill has been long awaited. It has been rapidly adapted in the light of current concerns about Russia and Ukraine, so it inevitably has gaps and shortcomings. We are told that ECB 1, if I may call it that, is going to be followed soon by ECB 2. I hope so, and that, in winding up, the Minister will assure us that the issues addressed today and by the NGOs, and the wider set of issues that have been identified, will be picked up in ECB 2 rather than it having a narrow focus.
I would like to spend what remains of my time—so many good points have already been made that I am skipping through my remarks—on the theme that compliance begins at home. The right reverend Prelate made a point about ethics; if he will forgive me for saying so, the only way is ethics.
Enablers such as law firms, accountancy firms and, if we are in a confessional mood, banks—I am a former banker—working with international clients whose source of wealth is opaque, have many questions to answer. The temptation of substantial new fee-earning opportunities has led some firms to take an accommodating, light-touch approach to anti-money laundering regulations—just within the letter of the rules, although sometimes not even that, and largely on a self-regulating, self-reporting basis: what we might call “marking your own homework”. Some enablers, as part of their onboarding process, actually coach clients in how to answer. They are tactical in what they ask—and do not ask—of clients, or accept pretty modest levels of proof, or even provide clients with services to mask their wealth and ownerships, or distance themselves from a rather disreputable hinterland.
I had hoped that the unexplained wealth orders that feature in the Bill would address this, and perhaps interim freezing orders, which do not seem to have been touched on tonight, might address some of the issues about the short notice required. But they appear to be directly almost exclusively at PEPs, politically exposed people, and those involved in serious and organised crime, which is not really defined in the Bill. I am not sure what “unserious and disorganised” crime would look like.
In asking Ministers about this narrow scope, I was told that existing anti-money laundering requirements on lawyers, banks and so on already require them to determine a client’s source of wealth and that they cannot take on clients who do not meet those requirements. “There’s no such word as can’t” is a weary old adage for anyone like me who had an old-fashioned upbringing. There are firms that can—and some of them do. Working in a private bank, it used to baffle me how we never took on Russian clients because it was just impossible to get them through all the tests, and yet I knew people who worked in other banks that were eagerly taking them on. I could not understand how they were doing it, but I think I know now.
For the past 25 years, I have worked with countries across the former Soviet Union, particularly Russia. Subsequently, for a period of about nine years, I worked in the private banking world, which bears out some of the points I have just made. For some, an occasional fine is just the cost of doing business. I do not know the full details but I noticed that, on Monday, the FT reported that an ex-partner of a leading firm was fined a mere £17,500 for lack of adequate due diligence in Russian transactions. That is a derisory amount.
The Bill needs to be strengthened in this area in two ways. First—this was touched on by the noble Lord, Lord Vaux—we want a named, senior-level sign-off by an enabler firm’s management to confirm that all wealth has been properly explained and evidenced, in compliance with the regulations. Given the existing rules, that may sound like belt and braces to some, but my goodness, that simple addition is needed. There is nothing like having a senior person sign off and remain on the hook. Could this perhaps be introduced as a modest but vital amendment to either this Bill or its successor, which, we are told, is imminent?
Secondly—this has been touched on by other noble Lords—with responsibility must come transparency. I am in no doubt that, unless there is properly resourced enforcement, abuse, rule-bending and blind eye-turning will continue. The National Crime Agency and others are almost on their knees from being understaffed; they are struggling and underresourced, as many noble Lords have said. Resourcing was also raised via amendments in the other place; I hope that this issue will be taken up by the Government to ensure that compliance is not only said to be done but regularly, independently and forensically checked. I would be grateful for the Minister’s commitment to that in winding up.
Finally, I want to touch on one aspect of the enablers’ work that has become a stain on the reputation of the UK. Many noble Lords have touched on this, notably the noble Lord, Lord Thomas—I look forward to supporting his Private Member’s Bill if we get the chance. Some call it strategic litigation against public participation. If you have a lisp, as I do, that is extremely difficult to say. I prefer to call it what it is: lawfare. It is the deliberate use of UK legal firms to intimidate and overwhelm authors, publishers, journalists and others who seek to bring into the light matters of public interest concerning the origins of unexplained wealth. Everyone has the right to defend their reputation robustly but what we have here goes way beyond that.
Examples abound but let me cite just one tactic. No matter how hard they have sought to engage with the parties they are reporting on, a journalist finds both themselves and their publisher receiving, at the last moment before publication, voluminous—there is sometimes truckloads of it—complex and menacing correspondence from heavy-hitting law firms threating ruinous legal action. Being on the receiving end is not only extremely intimidating; it also requires delay and specialist work that few can afford. It is indeed a brave journalist or publisher who, faced with this inequality of arms, still proceeds. Many, of course, do not. I also highlight—I do not think that we have touched on this tonight—that there are cases where human rights defenders, for example, working in other countries have, as a means of intimidating them, been sued or threatened with being sued in the UK courts.
UK firms have been systematically involved in these practices for far too long. I understand that there is a consultation going on; Dominic Raab’s work was mentioned earlier and I look forward to seeing the results. There are lessons that I believe we could learn, for example, from Australia’s model litigant principles in this area, which I will not elucidate now.
In closing, I ask the Minister: is he able to confirm, or at least offer some guidance on, whether the Government recognise the problem that I have highlighted, which arises directly from UK firms taking on wealthy clients of the sort that this Bill seeks to address? Will the Government, in ECB 2, include appropriate curative measures?
Lord Clement-Jones (LD)
My Lords, I draw attention to my entry in the register of interests. This is important and welcome legislation, which rightly we want to see pass through the House as a matter of urgency. But it must have teeth. As someone who, I confess, until recently held a solicitor’s practising certificate for 45 years, I say that it is toothless in a major respect, which has been touched on all around the House today. Whether under the beneficial owner register requirement, the unexplained wealth orders or the sanctions regime, there is a lack of provisions which comprehensively tackle enablers—the professionals used by those seeking to evade the impact of these provisions. A number of noble Lords, starting with the noble Baroness, Lady Chapman, have raised this.
As Edward Lucas put it in the Times last week:
“Putin’s ‘enablers’ live and work among us. They include bankers, lawyers, accountants, fixers and political bigwigs. Seemingly the epitome of respectability, for three decades they have prospered mightily, laundering Kremlin cronies’ fortunes and reputations.”
We have heard from my noble friend Lord Thomas of Gresford how they try to gag brave journalists, such as Catherine Belton, the author of Putin’s People, through what are called strategic lawsuits against public participation, also mentioned by the noble Lord, Lord Cromwell. But it goes much further than that. These professional advisers provide nominee and shell companies to hide disclosure of beneficial ownership of property and other assets; help to shelter unexplained wealth and freezing orders; and evade other tax, money laundering and economic crime legislation. They intimidate regulators with a mounting burden of costs if they are challenged.
As the OECD report Ending the Shell Game: Cracking Down on the Professionals who Enable Tax and White Collar Crimes, published last year, puts it:
“Over the last decades, the world has witnessed increasingly sophisticated financial crimes being perpetrated across borders—and the public interest in addressing such issues has also grown, as has been evidenced in the media through widely publicised leaks such as the Panama and Paradise Papers … These crimes are often facilitated by lawyers, accountants, financial institutions and other professionals who help engineer the legal and financial structures seen in complex tax evasion and financial crimes. The small segment of professionals that generate opportunities to facilitate the commission and/ or concealment of such crimes undermine not only the rule of law, but their own profession, public confidence in the legal and financial system, as well as the level playing field between compliant and non-compliant taxpayers.”
The report makes a very clear call to OECD countries to adopt strategies to address these issues in relation to professional enablers. But I see very little sign that such a strategy is being adopted by our Government. Last December’s Chatham House paper, The UK’s Kleptocracy Problem, makes very similar points. Where are the legal sanctions for professional enablers? Where are the measures to prevent abuse? Where are the mandatory disclosure rules? Where are the penalties for false statements? Where is the necessary whole-of-government approach that is recommended in this respect? The Prime Minister seems to think that regulation by the Solicitors Regulation Authority is a sufficient deterrent.
What is in the Bill as regards legal costs is fairly feeble too. We should be limiting costs payable by law enforcement bodies and regulators acting in the public interest in all civil cases under the Proceeds of Crime Act, as with criminal proceedings. These can represent a severe detriment to enforcement action, and I am very grateful to Spotlight on Corruption for pointing out, for instance, that the costs order against the NCA was in the region of £1.5 million in the case of the Aliyev unexplained wealth order—that is £1.5 million out of the total annual anti-corruption budget of £4 million. It is totally unacceptable. The courts should, of course, still be able to award costs against a law enforcement body or regulator where it has acted unreasonably in bringing or defending proceedings and the interests of justice or fairness would be offended, so there will still be some protection.
I will be tabling amendments in Committee which I hope noble Lords will support. We must tighten the net around these enablers. If not now, when?
Viscount Waverley (CB)
My Lords, as a brief declaration I remind noble Lords that I introduced a debate on relations with Russia in January 2018, then Salisbury occurred. Shortly thereafter, I introduced a debate on relations with Ukraine. In the same spirit, I also state that in 1997, I travelled in a delegation made up of Europeans to explore mechanisms to have Ukraine admitted to the European Union. I regret that that initiative did not advance.
I welcome the Bill. However, while the catalyst for it has been the war in Ukraine, it is a much-needed staged process, having been on the drawing board since 2018, to usher in overdue fiscal discipline to the United Kingdom. Once again, it is an illustration of the type of principled country we should be.
Put into context, the Bill has three elements—tactical, strategic and political—which should be considered. First, I shall deal with the tactical. The current draft leaves the door open to companies that hold UK property claiming they have no beneficial owner. This is already a common problem with the company register. The number of companies registered using overseas addresses that have been dormant since conception surprises me. It was explained to me that overseas people can have an accountant register a company and open a bank account; once established, there is an exchange of shares to the actual and final beneficiary. Alternatively, the horses have bolted, and I am told that moveable assets have already taken flight to such destinations as Hong Kong or Nauru in the Pacific.
Some 1,892 property titles were purchased by overseas companies before January 1999. These would be exempt from having to declare their owners under the current drafting. I favour research being done retrospectively, asking questions where concerns arise. There are concerns that the legislation will allow individuals to hide ownership of companies through nominee agreements with professional services firms. Such agreements could allow the true owners to claim that the offshore companies are controlled by, for example, a nominated law firm which is named on the register, rather than the true owner.
The Chartered Institute of Taxation, which sent a note to a number of your Lordships, raised a central point, however: it believes there is a lack of clarity over what the Government are trying to achieve. The Government might want to respond specifically to that point. If the Government’s aim is, as suggested in some government statements, revealing the real identity of foreigners who own UK properties, the institute does not believe the Bill will achieve this. This is because the legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather disclosure of the beneficial owner of the overseas entity which, in turn, owns the property. Its response is that if a separate nominee company is set up for the particular beneficial owner, then it thinks they would be caught. But if a non-UK law firm’s general nominee company is used and acts for hundreds of different clients, it will be difficult to see that any one of them exercises significant influence or control of the nominee company. So says the Chartered Institute of Taxation.
The combination of the imposition of fines for sanctions breaches and the expansion of the unexplained wealth order regime should be a central plank, however, as they will be effective in allowing the NCA and other prosecutors to disrupt criminal activity.
It is with some trepidation, in the presence of such fine judicial minds, that I venture to move on to my next point. Clause 49 amends Section 146 of the Policing and Crime Act 2017, introducing a strict liability offence for the breach of financial sanctions. Significantly, the individual or entity did not, therefore, have to know, or have reasonable cause to suspect, that they were breaching a financial sanction. A defence is to illustrate that appropriate policies are in place that illustrate compliance with the law, as is the case under the Bribery Act 2010.
Secondly, on the strategic element, the Bill probably shall not decisively weaken the Russian regime. It is wrong to believe that kleptocracy measures equate to a massive blow to the Russian leadership. The relationship of many oligarchs with the Putin power structure is often ambiguous. If anything, the proposed measures will be vocally lauded by much of the Russian public. The power structure of the regime is based on the siloviki, translated literally as “the powerful ones”, consisting of the intelligence apparatus, the higher echelons of the military structure and the deep-state bureaucracy at federal and local levels. They are the people who need to be followed: they are estimated to be around 1% of the population. These people—and it is they who will decide the future of a Putin presidency—are normally not allowed to travel abroad or own any assets overseas. They are the people the Government need to keep an eye on.
Other measures will affect Putin’s cost-benefit analysis on the war in Ukraine, with a notable measure being the announcement that Russia’s central bank would have its foreign reserves frozen. The banning of all transactions with the Russian central bank, with the United States establishing the list of specially designated nationals, which would prevent financial brokers and central security depositories dealing with it, will have considerable effect.
Thirdly, on the political element, while this Bill is introduced in the context of Russia’s attack on Ukraine, it is important to note that its impact will not be limited to Russian entities or persons but will affect all non-UK entities and individuals in Britain. The purpose of this Bill is not to disrupt legal arrangements in our haste to target certain Russians.
Any law is only as effective as its enforcement. The provisions in the new Bill will make little difference unless authorities are provided with additional resource to enforce them. The UK already has strong tools to target illicit funds, but law enforcement agencies have struggled to make full use of them because of resourcing issues.
The Bill will place additional administrative burdens on Companies House and the Land Registry. Will the Government confirm today that funding for the enforcement of new powers—including the enforcement of the register of overseas entities and the sanctions proposed in the Bill—will be put in place?
In conclusion, and more generally, I will focus on what has brought us together this evening. Consequences for sanctions are a small price to pay for the blockades, the bombing of population centres, the targeting of hospitals, the abuse and mining of humanitarian corridors, the destruction of essential infrastructure and food supply disruption.
The situation is sickening, and those responsible must be held to account. The building blocks and justifiable slow drumbeat of a European war, defending our values and Ukraine, are possibly just on the horizon. President Zelensky’s call to arms to Parliament may be a precursor to Britain’s accepting engagement. Ukraine’s war is our war.
Baroness Jones of Moulsecoomb (GP)
My Lords, I am going to say something that I do not think I have ever said before: I have really enjoyed this debate. Virtually every noble Lord who has spoken has said, “I support this Bill but …”—and then has proceeded to give a list of reasons why it really is not a very good Bill. My noble friend Lady Bennett suggested that I was going to go into detail but, until this debate started, I thought I was going to follow the noble Lord, Lord Sikka, who has written an excellent 11-page briefing on the Bill, with three and a half pages that outline all the problems with it. I recommend that the Minister takes my copy afterwards and does something over the weekend to brush the Bill up a little.
The past two weeks have been very stressful, even being on the sidelines of watching a European war, and this seems to be the least we can do to actually fight part of that war for Ukraine. We all know that global capitalism is out of control—at least we really ought to know that by now. The mega-rich have been able to abuse their power and their wealth for far too long through investor visas, complex trusts and corporate structures, political donations—more of that in a moment—private schools, aggressive tax avoidance and legal tax loopholes. The mega-rich are actually able to pick and choose whether they obey the same rules and obligations as the rest of us have to do. It seems to me that we really need to get to grips with this. Governments all around the world allow them to get away with it. Worse, they lay out the red carpet and cut the red tape to try to attract them. We are told that cracking down on such people will just create unintended consequences and force them to flee to other countries. Well, we can hope.
These problems have been obvious for a long time, and this Government have ignored them for their 12 years in office. While I also welcome measures in the Bill and accept that it is urgent—because of course it has been urgent for quite a number of years—the Government have to face the shameful fact that they have dithered and delayed, until they have been forced to act by an illegal war. When a hard-line version of Brexit was pushed through Parliament in 2020—and I voted for Brexit; I did not realise that any Government could mess it up to this extent—we had 14 Ministers in Boris Johnson’s Government who had received donations from individuals or companies linked to Russia. Is that the reason why this economic crime Bill is so late and the measures in it so limited? Do the £3.5 million in Russian donations in the decade following 2010 explain why we have ignored Russian interference in our politics, why our intelligence services were not allowed to dig deep into the network of rich Russians and Conservative Party politicians, and why Parliament failed to push forward with the concerns brought to light by the Russia report?
I asked, I think last week—time goes so strangely here—what Russian donors to the Conservative Party get for their money. This is a question that the whole country would like to know the answer to. Is that money stopping the Government putting sanctions on large numbers of rich people who are close to Putin? Do the donations explain why we have fewer sanctions on Russia than the EU, Canada or even Switzerland? There are only just over 300 UK sanctions against Russia, 35 of which have been introduced since 22 February; and, before that, so few. By comparison, the US has sanctioned almost 1,200 individuals and companies, and a fifth of those sanctions have been introduced in the past two weeks.
So London is still a playground for oligarchs, oil barons and outright financial fraudsters—and, as has been said, it is not just Russians; there are unsavoury elites from almost every country on earth. This new legislation has to be used against all illegitimate, dubious members of the global elite, not used simply as a political tool against whoever we think our enemies are at that particular point. There has to be a constant tightening of the laws that constrain the mega-rich. The Government cannot be allowed to rest on this singular piece of legislation—or this double piece of legislation—and say, “We did it”. I regret that there is no sort of sunset clause so that we can look beyond this—the Bill definitely needs better writing.
The Bill can only be a starting point. The upcoming Queen’s Speech must include a raft of legislation to take these issues forward further and faster than many Tory voters or Back-Benchers might feel comfortable with. We really have to do more, and the Bill is only the start. The noble Lords who have explained this evening where we should be going really have to be listened to.
Baroness O’Loan (CB)
My Lords, it was a privilege yesterday to listen to the brave and compelling words of President Zelensky on the situation in Ukraine. We are at a pivotal moment in the history of this world and we stand again at an abyss. Brave people in Russia are trying to stand up against the invasion of Ukraine by their own leaders, but their efforts are being ruthlessly suppressed. We should pay tribute to those who go out on the streets of Russia to protest, knowing that there is no right of freedom of speech in that country and that their actions will inevitably attract sanctions.
President Zelensky asked that we do all we can to increase the sanctions against Russian kleptocrats and other criminals. The economic crime Bill is but one small measure that will allow that to happen; we must not escalate the conflict, but this measure should help a little. There is a widespread view that its effects need to be more immediate. I welcome the Bill, limited though it is, as so many noble Lords have observed.
I want to make one small point. Clause 48 creates a more robust power to impose monetary penalties by amending the Policing and Crime Act 2017 so that a person will be liable to sanction if a breach of a prohibited act or failure to comply with an obligation can be proved. Whether they had knowledge or reasonable cause to suspect that their actions were in breach of a sanction is irrelevant. If there has been a breach, fines, which can be very substantial, may follow. The clause enables greater flexibility in the decision-making process, permitting decisions to be made by other officials in the department rather than a Minister. It could be argued that the power in this section is so extensive that decisions should continue to have to be made by Ministers. At the very least, guidance should ensure that any official given such a power should be of an appropriately senior level.
Taken together, Clauses 48 and 46—the latter changes the costs regime following enforcement action—may give rise to questions about the Government’s assertion that the safeguards available in the legislation fully protect a person’s rights. There is an urgent need to prevent the kind of money-laundering activities to which the Bill is directed. Judges will have discretion as to the kind of costs orders that are made. It is important, though, that the procedures we adopt are capable of withstanding scrutiny and challenge.
Clause 46 amends the Proceeds of Crime Act 2002. Of course, that Act has many deficiencies, not least that the person subject to the inquiry and to the POCA proceedings sells the property identified, often at a price significantly lower than the normal market price. However, this is an amendment to the Proceeds of Crime Act relating to who bears the costs of proceedings, as other noble Lords have stated, associated with unexplained wealth orders, where a person who is not found guilty of any breach or any offence may have to pay very substantial costs, possibly greater than any fine, unless they can prove that the enforcement authority acted either unreasonably or, alternatively, dishonestly or improperly—whatever “improperly” may mean. Notwithstanding this, there are concerns that, given the complex and sensitive nature of such proceedings and the investigation that precedes them, it could prove profoundly difficult to meet this test of improper behaviour, dishonesty or unreasonableness.
I ask Her Majesty’s Government whether they can assure the House that these provisions fully protect a person’s rights not to find themselves with a very large costs bill resulting from an unfounded allegation or action, so that those with legitimate funds to invest in the UK will not be deterred from so doing. In saying this, I do not in any way detract from the condemnation of what is happening in Ukraine at present.
Lord Empey (UUP)
My Lords, there have been many excellent speeches this evening from people who have pointed out deficiencies in the legislation. I sincerely hope that the Government, over the weekend and before Committee, will listen to what has been said and make running repairs as required. If ever there was a case of closing the stable door after the horse has bolted, this is it. We have known for years what people were up to in this city and this country, and we have turned a blind eye. Now, it has come back to haunt us. I must point out to colleagues that the warning signs have been there. We know that this legislation, however belated, is fundamentally the right way to go, and I support the principle of it. However, I sincerely hope that the valid points which have been made in some excellent speeches will be listened to and acted upon as we move towards the conclusion of the Bill’s legislative stages.
I was privileged to serve on your Lordships’ Select Committee that undertook post-legislative scrutiny of the Bribery Act, under the chairmanship of the noble and learned Lord, Lord Saville of Newdigate. We were looking at how the legislation had been operating over a five-year period. In some respects, we probably should have looked at it at a slightly later stage. However, one thing which stood out from our committee’s inquiry—and which is again before us tonight—is the total inadequacy of the enforcement resource involved and required. We were looking at bribery in the context of ordinary commercial activities. We were not looking at it in terms of something very specific, as we are tonight. At that stage, we had representatives come before the committee pointing out that they just did not have the resources. We all know that if you are going to carry out an inquiry—whether it involves the police, the National Crime Agency or another organisation—it takes time. But we are giving half a year for people to go and do what they do best. I do not believe for one minute that, if they ring up or knock on the door of some of the professional houses in this city, they will be turned away for advice or help. They will get the best that money can buy. I sincerely ask the Government to look very closely at that.
In her opening remarks, the Minister referred to legislative consent motions from the devolved jurisdictions. I understand that the timescale was such that this has not been possible. However, can the Minister assure the House that we will not be leaving any back doors open as this legislation proceeds, so that part of our country could be used in a roundabout way to thwart its purposes? I hope that we can have an assurance to that effect.
The Minister will also be wearing his other hat, as Energy Minister. The war has been possible because it has been funded by the sale of fossil fuels by Russia, which accounts for some 65% to 70% of its economy. Unfortunately and understandably, we had COP 26 and a general view in this country and around the world that we must move away from our dependency on fossil fuels. As a former Energy Minister, I fully understand and accept that. However, we have not advanced to the point where we can survive in this country without almost 100% fossil fuel back-up, because wind is not dependable in all circumstances and we have not sufficiently developed wave and tidal power. These are 10 to 15 years away.
I understand that, being a relatively small country geographically speaking, things like fracking and the development of resources on land and in our own North Sea are controversial. But the fact remains that next week, we are going to pump concrete into wells in the north-west of England, which means that it will no longer be possible to extract gas from them. At the same time, we are leaving ourselves and our European partners very dependent on gas. There have been some disastrous decisions, particularly in Germany regarding the development of its energy policies. I ask the Minister to address that issue, because although it is not quite within the remit of the Bill, it is fundamental. Where are we going to get our resources from? They are not going to appear out of nowhere.
I support the fundamental principle of the Bill, but please can we have some clarity—if not tonight then as we move through the remaining stages—on what plan is in place to ensure that the bodies being given a role under this legislation will have the resources to investigate and enforce? Those are roles that bodies such as Companies House do not have. Where are the people who will be doing this work going to come from? Who, on the Monday morning after the Bill is passed, is going to open the file and start an inquiry? Where are they? That is very much the message that we in the post-legislative scrutiny committee got from looking at the Bribery Act: that the resources are not there to match our ambition. I hope the Minister can reassure the House when he winds up.
Lord Macdonald of River Glaven (CB)
My Lords, the noble Lord, Lord Carlile of Berriew, mentioned Alexander Litvinenko, and I should like to do so too. I was serving as Director of Public Prosecutions when he was murdered in London, dying of radiation poisoning in University College Hospital, a stone’s throw from here. Those of us charged with investigating and assessing this crime were left in no doubt at all that there had been Russian state involvement in its conception, planning and commission, most likely at the very highest levels. We believe that this was a state execution, carried out in the most public way possible, on the streets of our capital city, of a man under the protection of the British state.
I recall having a conversation at the time with the head of my counterterrorism division, in which we agreed that from this moment, everything had changed. If the Russian dictator was prepared to do this, where in future would the line be drawn? Perhaps we felt, “nowhere”. Nothing that has happened since then—Syria, Salisbury and a multitude of other provocations and crimes—has changed that view. In a real sense we may conclude that the invasion of Ukraine was inevitable; it was an outcome hiding in plain sight, and one which we, frankly, did too little to anticipate or prevent. Clearly, though, this also a watershed and time for us to reassess the way we have responded—or failed to respond—over the years to Putin, to his enablers and to their Russian money.
I support the Bill so far as it goes but I believe that it must presage a much broader and deeper rebalancing and retooling of our defences against the violence of the Russian regime and the financial corruption it brings in its wake. That corruption, in the form of looted funds, has found a home in London. We all know that. We all know that London has been the playground and piggy bank of choice for oligarchs, including those who owe their wealth to Putin and give him their public fealty. Beyond them, of course, are those who are less connected to the dictator but who, for the sake of their riches, agree not to challenge him and pay court at the Kremlin in a more surreptitious but equally shameful form of support.
It seems that we all now agree that the unfettered ability of these people to conceal their property and wealth in the United Kingdom beyond any sensible scrutiny is contrary to our national interest—good. Particularly welcome in this Bill, therefore, are the provisions in Part 1 around the transparency of property ownership. They are long overdue and urgent but we cannot delay. Six months is too long; it would defeat the very purpose of the Bill. Transparency of ownership is the most basic anti-corruption tool, and the Government have resisted it for far too long. It is beyond time for us to discover which parts of our cities and countryside these people own but we will not discover anything unless we move quickly and—as the noble Lord, Lord Eatwell, said—unless verification is effective.
Let me turn to the question of lawyers, which has occasioned much comment, including in the other place. I start by confessing that, as a criminal lawyer, I have represented many men and women over the years whom I would not invite home for tea. However, in matters of litigation, it is equality of arms that is the real problem. Oligarchs are rich; they can afford the very best advice. The risk is that, in doing so, they can out-gun enforcement bodies, not because their cases have merit but because they are rich. This is not necessarily to criticise their lawyers; it is to criticise the system for having no solution to this conundrum.
Having run the main prosecuting authority for five years, I know how pressing this problem can be. A single case lost against the richest of opponents can take a huge chunk out of your budget in costs orders. This has been a critical issue in the area of unexplained wealth orders. Frankly, it has helped to hobble them. Going for one is simply too financially risky: if you lose it, it costs you a small fortune. That is one reason why there have been so few, but it is not the only reason. I absolutely promise the Minister that, without properly funded enforcement agencies, we will make no progress—costs orders or no costs orders. This reform is toothless on its own. The NCA needs to be funded to conduct this work. It needs to employ the right people and it needs to have confidence that the Government will back it in doing so by putting their money where their mouth is.
Finally, let me deal with the question of our adoption of sanctions measures imposed by allied states with due process-compliant justice systems, dealt with in Part 3 of the Bill. I have heard many civil liberties lawyers complain about this proposed provision but I have no difficulty with it at all. We are talking, in essence, about the Five Eyes countries: the United States, Canada, Australia, New Zealand and the European Union. These are democratic societies and long-standing allies of the United Kingdom—our very closest allies—and each is demonstrably attached to the rule of law. In a moment of exceptional international crisis in which we all stand together, this is a proportionate—indeed, laudable—proposal.
From Alexander Litvinenko to Salisbury, the shelling of Kharkiv and the destruction today of a children’s hospital, the Putin regime has proved itself to be utterly contemptuous of the law. In the face of this, we must use ours more intelligently. I am glad that the Government have brought forward this Bill—it has my support—but Ministers should be under no illusions: there is much more left to do.
Lord Fox (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Macdonald. I think it is the first time I have ever had to do so; it is quite a daunting prospect having heard such an important speech. We on these Benches welcome the belated realisation by this Government that the City of London and other parts of the economy in this country need to be cleaned up. Just as the noble Baroness, Lady Williams, asked, we certainly aim to support this Bill practically.
This has been a strong debate. Some of your Lordships—the noble Lords, Lord Faulks and Lord Rooker, and the noble Viscount, Lord Waverley, to name but three—have, with justification, been able to say that this issue has been on their agendas for some time. Others, such as the right reverend Prelate the Bishop of Leeds, have highlighted the purpose of and focus on ethics that we should also dwell on. There was a sense of frustration in all the speeches that it has taken the terrible events in Ukraine—the onslaught on civilians—to cause this Government finally to act. They are acting, and we should take advantage of that, but it is awful that it has taken that to get to this point.
In welcoming this Bill, we are not blind to its shortcomings. Your Lordships have been wise to set out whole areas of action that need to be resolved before we can start the process of cleaning out the dirty money in the United Kingdom’s economy. I will not seek to paraphrase everything that was said but we heard about SLAPPs and the use of lawfare from the noble Lords, Lord Thomas and Lord Cromwell, and the noble Viscount, Lord Colville. We heard about company shells from the noble and learned Lord, Lord Garnier, and about trusts, freeports and whistleblowers from my noble friend Lady Kramer. The need to be more deeply retrospective was introduced by the noble Viscount, Lord Waverley, and the noble Baroness, Lady Bennett, as well as the issue of speeding up disclosure from Crown dependencies and overseas territories. Those are just some of the issues put by your Lordships before this House.
Virtually none of those substantive issues appear in Part 1 of this Bill. It seems that most of them might turn up in Part 2 but we heard the curriculum that the noble Baroness, Lady Williams, is putting forward for that part: limited partnerships, crypto assets, money laundering and Companies House. To digress on Companies House, the noble Lord, Lord Eatwell, very much paraphrased the issue: this is not just about resources. The cultural change required to make that organisation in any sense capable of doing any of the things that this legislation asks of it is huge. By the way, it is not just Russians; if Companies House had been doing what it should have, literally billions of pounds would not have been defrauded from taxpayers during the Covid crisis. A small fraction of that money could have been used as seed to produce a Companies House that is fit for purpose. Now we have lost that money but we still need to do the job.
Coming back to the Bill, all the issues that have been set out need to be tackled in its second part. I am looking for the Minister to acknowledge that, although the four issues set out by his colleague, the noble Baroness, Lady Williams, are important, a number of really important issues need to be added to that list. If it becomes an even bigger and more complicated Bill, I guarantee that those on these Benches will work hard to make sure that we can get that legislation through as quickly as possible. As the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Garnier, said, we also need a process that reviews how Part 1 is getting along because it is clear that the speed with which this legislation is being implemented—and, indeed, the fact that it was written for one purpose and is being delivered for another—will inevitably mean that there are things not right with it.
We will work to help ensure that when the final Act—this part of the process—emerges, the Government will get the tools they say they need. When they get those tools, there will be no excuses for not following up on the people we have heard described to your Lordships this afternoon. As we have also heard, to do that will take well-resourced, highly qualified and motivated people to investigate and prosecute. The noble Lords, Lord Macdonald, Lord Carlile and Lord Empey, to name but three, set out the issue here. Unless the agencies tasked with cleaning up the kleptocrats have the resources and the support, the Bill does not amount to a hill of beans.
To date, this is an area the Government have been defunding. For example, the National Crime Agency—the principal body leading this fight, as we have heard—has seen its overall budget fall in real terms. The last inspection by Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services in July 2021 pulled no punches and highlighted how resource limited the NCA is. Further, the inspection also noted the difficulty in recruiting staff for investigating roles. There are remuneration and status issues around why that is not happening. It gets worse: within the NCA, the body specially configured to investigate kleptocrats is the international corruption unit. As we know, the ICU’s role is to investigate money laundering resulting from corruption by high-ranking overseas officials, bribery involving UK-based companies or nationals that has an international element, and cross-border bribery where there is a link to the UK. I am afraid the ICU seems to have fared even worse. Can the Minister confirm that it has had its budget slashed by 13.5% this year?
Meanwhile, over the past couple of weeks the Government have said they will set up a new kleptocracy cell within the NCA to target sanctions evasion and corrupt Russian assets hidden in the UK. The press release said that oligarchs in London will have “nowhere to hide”—there is a joke in there, but I decided not to use it. How exactly will the new NCA kleptocracy unit mesh with the existing ICU? For that matter, how will the kleptocracy unit relate to the complex web of underfunded joint committees and task forces that litter this area of investigation? The agencies we have are underfunded and there is a confusing web of different organisations and crossing accountabilities. Together, this adds up to the enforcement agencies being massively outgunned by the oligarchs, as we see and have heard from your Lordships. Is it any wonder that so few unexplained wealth orders have been issued?
The Government do not have to wait for the passage of the Bill. They could say now that they are going to reverse their defunding of the international corruption unit and announce now a funding boost for the NCA. We do not need a new unit or a new invention. We need the organisations that we have to be properly funded, targeted and supported to deliver the outcomes that I think your Lordships all hope for.
Next Monday we will have the opportunity to address the Bill before us in some detail. One thing is clear: the Government should embrace the issue of enablers more firmly. As we have heard, these are the lawyers, estate agents and accountants helping the kleptocrats. This theme, among others, was picked up in the Chatham House paper entitled The UK’s Kleptocracy Problem. It noted:
“Financial and professional services firms have long made the UK a comfortable home for dirty money.”
That is Chatham House, not some campaigning organisation that people might feel free to dismiss.
This Bill needs to explicitly target those professional services that knowingly create the comfort that has been enjoyed by Russian kleptocrats, and indeed by other thieves from around the world. They need to feel the heat. This is an issue that we will come back to on Monday, following up the excellent speech by my noble friend Lord Clement-Jones and the amendment that I know he has tabled.
Then there is the self-created loophole that was referred to by the right reverend Prelate the Bishop of Leeds: Clause 18. This allows all aspects of the register to be ignored if the Secretary of State decides that it is in the interests of national wealth to hide an oligarch’s assets. How big does the factory have to be for the theft to be ignored? How many jobs can a kleptocrat wash their soul with in this country? That is the nature of that clause—it hits right at the heart of what the right reverend Prelate had to say. It is, frankly, a continuation of what happens now; in other words, “The money is all right, so we won’t look at where it has come from.” My noble friend Lady Kramer was very strong on that issue. If we are to allow this line to continue in the Bill, it would essentially mean selling our moral soul in a different way—and it would put it into statute. We will have to address this issue when we get there.
There are issues that, following the debate in the Commons, we are looking forward to seeing how the Government will address. One is whistleblowers and another is freezing assets. We are looking forward to the Minister responding on that today or tabling some amendments before close of play tomorrow so that we can see where the Government are headed.
Finally, I know that the noble Lord, Lord Callanan, is an experienced Minister who knows how to read a room. If he is reading this Room, he knows that six months will not wash with your Lordships; that is very clear from almost every speaker, for lots of practical reasons. Money is already moving; the kleptocrats are cutting and running. To give them another six months’ head start essentially makes most of this pointless. I am sure that noble Lords on the adjacent Bench will be bringing forward an amendment, which we will certainly support when it comes before your Lordships’ House.
As the noble Lord, Lord Carlile, put it, in participating on this Bill in the way that we are—speeding it through Parliament—we are putting a lot of trust in the Government. We hope that trust is justified. We look forward to further constructive discussions on this Bill on Monday.
Lord Coaker (Lab)
My Lords, it is a pleasure to wind up for Her Majesty’s Opposition on this incredibly important debate and indeed to follow the noble Lord, Lord Fox, who made a powerful speech. I agreed with everything, really; there were other things that I might have highlighted, but I thought it was an excellent speech. It followed on from the many excellent speeches that we heard from across the House.
I start by setting the context because, as we debate this Bill in the Chamber, we are united in a common cause: to defend freedom and democracy and to stand shoulder to shoulder with Ukraine and its people against the illegal and immoral invasion by Russia of their territory. I highlight the speeches of the noble Lord, Lord Macdonald, and the noble Viscount, Lord Waverley, for pointing out and reminding us so powerfully of that. It really set the context for this debate and discussion today.
Many noble Lords have reminded us of this context, and indeed the Government themselves have said that the Bill is in part an urgent response to the Ukraine crisis. Our political outlooks may differ, but we all share a common belief about injustice, and there can be no bigger injustice than an unwanted invasion of a country’s sovereign territory. I remind us all of that, because it is why there is wide and general support across this House—and, I would say, within the country—for this economic crime Bill being rushed through in the way that it is. I say “rushed through” not as a criticism to the Government, but as something that it is important to do.
We as Her Majesty’s Opposition welcome it and, as we did in the other place, will support the Government in taking this through as quickly as we can. Although, as the right reverend Prelate the Bishop of Leeds, my noble friend Lord Rooker and the noble Lord, Lord Empey, and others have argued, should we not have acted before now? If money is dirty, then it is dirty. We must crack down; the UK’s role as a global centre for Russian money laundering has to stop. As the noble Viscount, Lord Colville, reminded us, Russian oligarchs secretly hiding money—as with all dirty money from anyone from anywhere—has to be stopped. There must be no hiding place or safe haven with hidden investments.
I say to the Minister that all the questions and challenges from me and other noble Lords are because we want the Bill to work. We want the sanctions to work and this economic crime Bill and the one that will follow it in due course to succeed. We all want the Government to succeed in this. It is not in any of our interests for the Government to fail or for these measures not to work. As the right reverend Prelate the Bishop of Leeds said, let this be the beginning of the new economic and monetary framework because it is ethically the right thing to do.
Turning specifically to some of the measures in the Bill on registration, these target those who exploit the UK property market by establishing a public register of beneficial ownership of overseas companies which own or want to buy real estate in the UK. Many noble Lords, including the noble Lords, Lord Macdonald, Lord Vaux, Lord Thomas of Gresford and Lord Faulks, the noble Baroness, Lady Kramer, the noble and learned Lord, Lord Garnier, pointed out the importance of this. We all welcome the reduction of the transitional period for certain overseas entities registering as such from 18 months to six months.
However, I do not think anybody who has spoken does not believe that six months is too long. As the noble Lord, Lord Fox, pointed out, we will table an amendment in Committee to further reduce that period. I think it was the noble and learned Lord, Lord Garnier, who pointed out that if you have six months to register it, it can be moved. I am not a genius in legalese and moving property, but if you have time to move the money we are trying to find out about, I suggest that many of these people—if they are bright and can pay for the advice, which they seriously can—will be able to do that. I say to the Minister that this is not out of anything other than that we do not believe six months will work in the way the Government want it to. I hope the Government will be able to listen to my remarks and those of noble Lords across this Chamber.
The noble Lord, Lord Carlile, and my noble friend Lord Eatwell pointed out Companies House. How will we ensure that it is fit for purpose? Companies House is essential to the functioning of the Bill. It is essential that Companies House works and is fit for purpose. In a brilliant speech, my noble friend Lord Eatwell—who brings an experience far beyond mine and that of, I suggest, many noble Lords—asked how the data will be verified. If the data is not verified as accurate, how can Companies House work effectively? Again, my noble friend Lord Eatwell is not bringing that forward to undermine the Bill or make a political point; he is bringing it forward as a man with all the experience in these areas that he has. He says to the Government that without the verification of the data, we cannot achieve. Without embarrassing the Minister, I think I am right in saying that my noble friend Lord Eatwell pointed to a book, or a preface to an article, that the Minister had written saying exactly the same thing. I hope the Minister can explain that and see how it will be done.
Unexplained wealth orders—again, measures to pursue and investigate unexplained wealth where property has been acquired with illegitimate cash—raise a question. We have had unexplained wealth orders; we all want to know what will make this version of them work this time, when the unexplained wealth orders that exist currently have not worked. Again, we all want them to work; but why will these work when others have not? The noble Lords, Lord Empey, Lord Carlile and Lord Macdonald, have again raised the issue of resources for the NCA to take the necessary action, as did the noble Viscount, Lord Waverley. If we are to have unexplained wealth orders, let them function in such a way that people who have unexplained wealth are fearful of the state taking action. At present, they do not fear it at all and do not expect anything to happen. We all want to see a solution to the issue of resourcing for the NCA.
The noble and learned Lord, Lord Garnier, in another powerful speech, noted that we must ensure that these measures are implemented sufficiently quickly to prevent people who have unexplained wealth shifting it before an order has been made affecting them. Again, that is an important point.
On sanctions, we have heard about the NCA, but the Government also talk about improving the Office of Financial Sanctions Implementation, giving it intelligence and information-sharing powers as stronger tools to carry out enforcement action. I had never heard of OFSI and had to look it up—it is in the Treasury—but these are people we will give stronger powers to. I have heard of the NCA, but what is happening with respect to giving these extra powers to OFSI?
As for sanctions, as the noble Baroness, Lady Bennett, and the noble Lord, Lord Hannay reminded us, how the Bill is enacted and enforced is essential, or else it is just warm legislative rhetoric. What we want to see is action. The noble Lord, Lord Clement-Jones reminded us that the Bill cannot be toothless. The Minister needs to reassure this Chamber that we have a Bill that will work and will carry sanctions with sufficient clout to take on the enablers and others.
As the noble Lord, Lord Fox, the right reverend Prelate the Bishop of Leeds, and the noble Baroness, Lady Kramer, mentioned, the Government need to explain the provision that someone will not be sanctioned if doing so is not in the economic interests of the country. The Bill as currently drafted appears to read as though there will be exemptions for occasions when it is not in the economic interests of the country for us to take action against a company or individual. Are we really saying that? Some clarification on that from the Minister will be welcome.
In his response, can the Minister explain and answer these comments made to him, and say who in government has ultimate responsibility for this legislation and its enforcement? Which Minister and which department will drive this forward? Will the resources to do it be made available? What further amendments are the Government considering and when will they be published? Will they be ready for Committee next week? What measures are the Government considering in their second economic crime Bill?
To conclude, we of course hope that this crackdown on Russian oligarchs and Russian dirty money will help undermine the regime and play its part in ending the war in Ukraine. The Bill allows us to take action against those who flaunt their wealth, predominately in London and the south-east, as the noble Lord, Lord Macdonald, reminded us. As the noble Lord, Lord Cromwell, said, however, it is those who are criminal whom we must act against, to stop them acting with impunity. Yes, the economic crime Bill is overdue, but it is a way we can act against Russia and those who support Putin now. Let us all hope that it plays its part in the defeat of Russia and the ending of the invasion of Ukraine, but also perhaps opens up the prospect of a more transparent financial system, not one so dominated by oligarchs with dirty money. We support the Bill and want it to work. It is in all our interests that it does.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I start by thanking all noble Lords for their constructive engagement in advance of and during today’s debate, and for the support generally expressed for the swift passage of this Bill. The noble Baroness, Lady Jones, was right—she is occasionally—that this was a good debate with many insightful points. I would not go so far as to say that I enjoyed it but it was nevertheless a good debate. It has underlined the importance of taking action on the dirty money flowing through the UK, following Russia’s brutal and barbaric invasion of Ukraine. I totally agree with the noble Lord, Lord Coaker, that it is more important than ever to ensure that we have the powers we need to take swift action to tackle economic crime. In doing so, we should ensure that the UK remains the place for legitimate investment to flourish. I am confident that this legislation strikes the right balance.
I know that many noble Lords—the noble Lord, Lord Fox, in particular—have a strong interest in Companies House reform and limited partnership reform. So do I, as the Minister responsible for implementing these important policies. Let me assure the House that these measures will be included in a wider Bill in the coming months. They will come alongside new powers to make it easier to seize crypto assets from criminals and measures to provide businesses with more confidence to share information on suspected money laundering.
Lord Callanan (Con)
I may be about to address some of the noble Lord’s points about Companies House reform so let me finish this paragraph; if I do not address his points, I will come back to him, if that would be helpful.
I can say to the noble Lords, Lord Fox and Lord Coaker, and others that reform is already under way at Companies House. It has received £20 million for this financial year. A further £63 million was announced at the spending review. However, the full Economic Crime Bill will be very significant. I understand why noble Lords are questioning me about why it is not being included at this time; to be frank, it is purely a matter of drafting time. This will be the biggest change to our system of company registration in some 170 years—the biggest change to limited partnership law since 1907. Drafting has already begun and I can assure the House that we will bring it forward as soon as we possibly can in the next Session. I hope that what I have been able to say will provide some reassurance to the noble Lords, Lord Eatwell and Lord Coaker, the noble Baroness, Lady Jones, and the House as a whole.
Lord Eatwell (Lab)
Given the wide level of expertise evident in this debate, will the Minister commit to pre-legislative scrutiny of the new economic crime Bill? That would be the way both to exploit the talents available in this House and to ensure that the Bill, when it arrives on the Floor, will have a smooth passage.
Lord Callanan (Con)
Let me come back to the noble Lord on that. I certainly commit to full scrutiny of the Bill when it is ready, which I think the noble Baroness, Lady Chapman, also asked me about. It will not be emergency legislation; we expect it to have the full scrutiny of this House. I think that pre-legislative scrutiny would probably be a bit time-consuming; it is probably better just to bring the legislation forward, then it will get its full scrutiny. However, as I say, we are getting it drafted as quickly as possible. It is something like 150 pages of legislation so it will be substantial.
Lord Fox (LD)
About that: with many other Bills, the Government go out for consultation for six or eight months, redraft the Bill, then have two more White Papers. Then, sometime after three Christmases, we get the Bill. So, does “as quickly as possible” mean a few months or weeks? Are we looking at the latter half of the next Session, or are we looking at it being one of the first Bills to come out in the next Session?
Lord Callanan (Con)
I cannot win on this one: if I give too much time to pre-legislative scrutiny, for consultation et cetera, I will be criticised. I cannot give the noble Lord, a definitive time because, of course, it is not purely in my hands; it depends on parliamentary time, on the Whips, on the usual channels and on the availability of the House of Commons. It is certainly my intention to get it in front of noble Lords in a matter of months but I cannot be more specific than that. It will depend on when it gets drafted and when we can get parliamentary time. It is a firm commitment that we will bring it forward in the next Session—ideally towards the start of the next Session, if that helps the noble Lord.
I welcome the support from across the House, particularly from the Opposition Front-Benchers—I thank them very much. As I just said, I can reassure the noble Baroness, Lady Chapman, and the noble Lord, Lord Vaux, that the economic crime Bill will progress under normal procedures. I am sure there will be a full and detailed discussion about it. I will speak later to some of the points of the noble Baroness, and the noble Baroness, Lady Kramer. The noble Baroness, Lady Kramer, also raised the subject of the Crown dependencies. I can tell her that I spoke to the Crown dependency Ministers earlier today, just before I came in for this debate, and they are also fully on board with these measures, looking to help wherever they can and to progress similar measures in their own jurisdictions.
Moving on, many noble Lords, including my noble and learned friend Lord Garnier and the noble Lords, Lord Rooker and Lord Faulks, raised the legitimate question of why it has taken the Government so long to introduce the legislation. I can assure them it is not for the want of trying on my part; it is purely about the pressure on the legislative programme. They, as well as the right reverend Prelate the Bishop of Leeds, stressed the importance, and I totally agree, of stopping dirty money flowing from Russia and, indeed, other countries. This is not just about Russia. It benefits us in terms of Russia but, frankly, this reform is long overdue and it will also help us in the fight against money laundering from other jurisdictions. What matters is that, despite the long delay, we are now urgently bringing this legislation forward. We were planning to put this in the wider economic crime Bill but we decided to introduce these measures earlier, to put them into effect shortly. I am grateful for the support of the Opposition in doing that, and the wider economic crime Bill measures will follow in due course.
I take the opportunity to thank my noble friend Lord Faulks again, for all his work to develop the legislation and for some of the powerful points he made today. I reassure him that since we took the measure thorough pre-legislative scrutiny, we have been able to improve the legislation to reflect some of the pre-legislative scrutiny committees’ recommendations and to align it with the broader reform of Companies House, which I completely agree we need to do, to make the measure effective. I think the legislation as a whole will be more effective as a result of the scrutiny that has taken place. This has been central to ensuring the new requirements are workable and proportionate and that the register strikes the right balance between improving transparency and minimising burdens on legitimate economic and commercial activity.
I thank the noble Baroness, Lady Kramer, the noble Lords, Lord Hannay and Lord Vaux, and my noble and learned friend Lord Garnier for their points on the transition period. I think the noble Lords, Lord Coaker and Lord Fox, made similar points. Let me explain our logic on this. We have already reduced the transition period from 18 months to six months. I understand the importance that noble Lords attach to this, but it is important to remember that the majority of properties held via overseas entities will be owned by entirely law-abiding businesses and people. To give noble Lords an idea of the scale, we are talking about roughly 95,000 properties in England and Wales owned by some 32,000 overseas entities. It is a fact that only a tiny fraction of these are likely to be held by criminal or corrupt interests.
The transition period is an important protection for the rights of those legitimate owners of property and we have to be careful about interfering with individuals’ property rights, interference that could not reasonably have been expected when those rights over the properties within scope of the register were originally acquired. This legislation has considerable retrospective effects. We have to ensure that we are respecting those rights in a way that cannot be challenged—not least under human rights legislation. No doubt, those who wish to avoid these requirements and are able to afford expensive legal teams will take advantage of any opportunity to do so.
Many of the ultimate owners will be law-abiding British companies that have adopted these structures for legitimate commercial reasons. They could include real estate investment trusts, which are public companies whose core business is to manage and own properties that generate income, or particular pension schemes that hold land and properties. Others will be British nationals who have adopted the arrangements for legitimate reasons of privacy—a point made from the Cross Benches but I forget who made it. That may involve, for instance, celebrities who do not want their address to be known publicly.
As the noble Lord, Lord Fox, observed, I am aware of the strength of feeling expressed that corrupt people must not be allowed to sell up and escape the transparency that the register will bring. The Government see merit in requiring all those selling property to submit a declaration of their details at the point of transfer of land title during the transition period. This would mean that a zero-day transition period to provide certain information immediately would be given to anyone selling. They would have to register ownership if selling, and that way we either get their ownership details immediately or, if they do not sell, we get it at the end of the transition period but in a way that still protects legitimate owners. We are urgently looking at this idea and giving it some serious consideration, but we need to get the drafting right and legally watertight, so that it is workable, effective and achieves what we want to achieve. Officials are working on this at the moment and I hope to get the proposal to noble Lords for consideration before we reach Committee.
Although the register will not be operational immediately, we expect the measures to have an immediate dissuasive effect on those who are intending to buy UK property with illicit funds. I can assure the noble Lord, Lord Faulks, that work on implementing the new register will begin as soon as we have achieved Royal Assent, and we will look to have the new register in place as soon as practicably possible—as soon as this House is able to consider and pass the relevant statutory instruments, and when some of the other measures are put in place. I should also add in response to many of the comments that all conveyancers and estate agents are already required to assess transactions for money-laundering risks and to alert authorities about suspicious activity.
I turn to the question from the noble Baroness, Lady Bennett, on the retrospective application of the register. It will apply retrospectively, thereby compelling overseas entities to register if they have property bought since January 1999 in England and Wales and December 2014 in Scotland. Those dates have been selected because they relate to when jurisdiction of incorporation was originally required by Her Majesty’s Land Registry and the Registers of Scotland when registering title documents for land. This information has never been recorded by the Northern Ireland land registry, so we are unable to make any retrospection apply there.
As set out in the Bill, if a foreign company does not comply with the new obligations, every officer in default can face criminal sanctions, including fines of up to £2,500 per day or a prison sentence of up to five years. We have also included a power to make secondary legislation that can allow the registrar to impose financial penalties for non-compliance without the need for criminal prosecution. Critically, non-compliant overseas entities will face significant restrictions over dealing with their land. That is important because by their very nature, it might be difficult to impose criminal penalties on people who are overseas. But a restriction on them being able to deal with and dispose of their land will be particularly important because that will in effect prevent sales and render the property worthless.
I thank noble Lords and others who have made insightful and important points on the importance of robust supervision and the need to tackle the so-called professional enablers. Those noble Lords include the noble Baroness, Lady Bennett, the noble Lords, Lord Londesborough and Lord Cromwell, the noble Baroness, Lady Chapman, the noble Lords, Lord Faulks, Lord Carlile, Lord Thomas and Lord Rooker, and others.
The UK supervisory regime is comprehensive. The UK regulates and supervises all businesses most at risk of facilitating money laundering, including accountants, estate and letting agents, high-value dealers, trust or company service providers, the art market and so on. We strengthened the money laundering regulations in June 2017, thereby bringing UK legislation in line with the latest international standards. This includes requiring estate agents to carry out due diligence on both buyers and sellers of property.
To be very clear to the noble Viscount, Lord Waverley, any money obtained through corruption or criminality is not welcome in the United Kingdom, including that linked to Russia or other countries. That is why we are at the forefront of global action, spanning the operational, policy and diplomatic communities to target the money launderers and enablers who underpin corrupt elites and serious and organised crime.
Baroness Kramer (LD)
I am sorry to intervene, but perhaps the Minister could explain why, if there is such an effective system in place, we have a problem today. Surely there is a flaw.
Lord Callanan (Con)
This is what we are attempting to address in this legislation. We are trying to make the system as transparent as possible, to improve the action on unexplained wealth orders, et cetera.
Lord Clement-Jones (LD)
My Lords, the noble Lord has contradicted himself. He said that there was a robust system in place, but he has just talked about money laundering for enablers.
Lord Callanan (Con)
I said there was a robust system in place under the money laundering regulations in response to the various points that were made about financial services professionals, estate agents, et cetera. That is not to say that we cannot improve the system; we certainly look to do that. Providing information and transparency on property ownership, unexplained wealth orders and the sanctions regime, which is what we are doing, will help to supplement that system.
In July 2021, the CPS amended its legal guidance on money laundering offences for prosecutors to make it clear that it is possible to charge someone under Section 330 of POCA, which relates to the failure to disclose money laundering in the regulated sector. This closes a long-standing gap in law enforcement’s toolkit, which will better enable us to tackle the small minority of complicit professional enablers.
In addition, the Solicitors Regulation Authority—the largest legal PBS which supervises approximately 75% of regulated legal service providers in the UK—undertook a broad range of enforcement action in 2021. This included issuing 14 fines totalling £163,000, suspending membership three times and cancelling membership 13 times, effectively preventing an individual conducting regulated activity.
To take another example, the Institute of Chartered Accountants in England and Wales—the largest accountancy PBS—undertook a broad range of enforcement action. This included issuing 59 fines, totalling £178,000, and cancelling the membership of firms six times—again, effectively preventing an individual conducting regulated activity.
The noble Lord, Lord Carlile, suggested that we should consider how we can make legal professionals report matters relating to national security in a structured way and without the benefit of legal professional privilege. This is a complicated matter and not for this Bill, but I certainly welcome his contribution and his engagement, and we will certainly look at that.
The noble Baroness, Lady Kramer, raised an important point on protecting whistleblowers. We recognise how valuable it is that whistleblowers are prepared to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. The whistleblowing regime enables workers to seek redress if they are dismissed or suffer detriment because they have made a so-called protective disclosure about wrongdoing. It is right and proper that the Government review the whistleblowing framework once we have had sufficient time to build the necessary evidence of impact of the most recent reforms. We are considering the scope and timing of a review.
A number of noble Lords—the noble Lord, Lord Macdonald, in particular— raised an important point concerning the wording “knowingly and recklessly”. The wording is drafted on precedent, coming from the Companies Act. This clause is intended to provide a necessary and proportionate deterrent to those who may otherwise provide inaccurate or misleading information on the register of overseas entities. This was debated at length in the other place and the Government have already made a commitment to reconsider the drafting. I also welcome the comments of the noble Lord, Lord Macdonald, on the sanctions proposals.
The noble Baroness, Lady Kramer, and the noble and learned Lord, Lord Garnier, asked about the issue of the register and trusts. If the assets are owned via an overseas legal entity, then this entity is within the scope of the draft Bill and will be required to register the trustees as beneficial owners with Companies House and state the reason that they are the beneficial owner—that is, because they are the trustees of that trust.
Her Majesty’s Revenue and Customs introduced a register of trusts in 2017. Trustees of trusts that acquire UK land or property are required to register and provide information on the beneficial ownership of the trust. The information on the register can be shared with law enforcement authorities and enables them to access information on the trustees and beneficiaries of all trusts. Reforms to unexplained wealth orders will also allow law enforcement to investigate the origin of any property held via trusts.
I now turn to the points raised by the noble Lords, Lord Vaux and Lord Eatwell, on verification. Clause 16 requires the Secretary of State to make regulations requiring the verification of information before an overseas entity makes an application for registration, complies with the updating duty or makes an application to be removed from the live register. To ensure that regulations are laid in a timely way, we have added a requirement for regulations to be made before applications may be made for registration in the register of overseas entities. We expect that UK anti-money laundering supervised professionals may have a part to play in this, and we will set out details on the verification scheme in regulations. Overseas entities will be required to update their information annually, and Companies House will be given broad powers to query information it holds via the further legislation to come later in the year. Also, the very public nature of the register means that there will be many eyes viewing the data, which will of course aid in identifying any inaccuracies. I thank my noble and learned friend Lord Garnier for his comments on whether we are capturing the ultimate beneficiaries of property. This is an important point.
Lord Vaux of Harrowden (CB)
The Minister has not answered the question about why the register is updated annually, not 14 days after a transaction in the way that the PSC rules have to be updated.
Lord Callanan (Con)
I will come to that in a second. The new register is designed to allow investigators to get behind opaque companies. Whether a title is held by a company or an individual, the noble Lord is right that there may be a different beneficiary of the property. That is something investigators may explore further. The task of this register is to look through the company, and that is where we are focused in scope. The question of recording the ultimate beneficiaries of property is a far wider point and would apply to properties held by individuals and UK companies too.
I thank the noble Lord, Lord Carlile, for sharing his experiences with Companies House. We have outlined in the White Paper, published last week, what we are proposing to do under register reform. We are seeking to limit the risk of the misuse of companies by ensuring more reliably accurate information on the companies register, reinforced by identity verification of people who manage or control companies and other UK- registered entities. We will give greater powers to Companies House to query and to challenge the information it receives, and we will give enhanced protection of personal information provided to Companies House. There will be more effective investigation and enforcement and better cross-checking of data with other public and private sector bodies. Companies House will be able to proactively share information with law-enforcement bodies where they have evidence of anomalous filings or suspicious behaviours.
I move on to unexplained wealth orders. I thank the noble Baroness, Lady Chapman, the noble Lords, Lord Vaux and Lord Carlile, and my noble and learned friend Lord Garnier for the points that they raised on the use of UWOs. The threat of substantial legal costs has been a barrier to the use of UWOs. Likely subjects of UWOs are the most litigious persons. To ensure that unexplained wealth can be investigated in the maximum number of cases, we are reforming the cost rules to ensure that agencies will not be burdened with high legal costs if they act with integrity. If an agency acts dishonestly, unreasonably or improperly, it may still be ordered to pay the costs of those subject to a UWO, which is to ensure fairness. An important point to raise regards the changes to the cost rules to limit law-enforcement liability following an adverse court ruling. Protection from costs means that the court has discretion to award costs against an enforcement agency only if it acted dishonestly, unreasonably or improperly. This will remove a key barrier that has discouraged the use of UWOs, while of course providing a safeguard against arbitrary use of the powers.
The noble Lords, Lord Vaux and Lord Carlile, expressed concerns relating to resourcing for law enforcement agencies. The Government have developed a sustainable funding model that demonstrates our commitment to tackling economic crime. The combination of this year’s spending review settlement and private sector contributions through the levy will provide economic crime funding totalling around £400 million over the spending review period. That includes the £63 million that I mentioned earlier for Companies House reform. Since 2006-07 nearly £1.2 billion of the assets recovered under the Proceeds of Crime Act has been returned to law enforcement agencies, prosecutors and the courts to fund further asset-recovery capability or work that protects the public from harm.
Account freezing and forfeiture orders are a hugely impactful tool in the law enforcement toolkit. AFOs have proved their worth in a wide range of cases and are seen by law enforcement agencies as a quick and effective method of disrupting criminals and recovering their assets. In 2020-21 just under £219 million of the proceeds of crime were recovered within England, Wales and Northern Ireland. This continues the general trend of improved performance since 2016-17.
The noble Baroness, Lady Kramer, raised an important point on Clause 18 of the Bill and the exemptions for which it provides. The phrase used in the draft Registration of Overseas Entities Bill, published in 2018, was that the Secretary of State may exempt a person from the requirement to register only for “special reasons”. This was intended to mirror the wording used in the Companies Act 2006 in respect of the persons with significant control regime. However, the pre-legislative scrutiny committee that examined the draft Bill in 2019 was of the opinion that the reasons why an exemption could be granted should be explicit in the Bill. The Government accepted the committee’s concern that otherwise the power may be too wide, and we amended the Bill accordingly—I think that also addresses some of the points made by the noble Lord, Lord Carlile. The circumstances outlined in the Bill have been carefully considered to provide clarity but also flexibility for unforeseeable but legitimate scenarios. Given that the key objectives of this register are to improve transparency and combat money laundering, these exemptions will be used very carefully, and only for evidenced and legitimate reasons.
The noble Baronesses, Lady Bennett and Lady Kramer, raised the subject of freeports. Throughout the bidding prospectus and subsequent business-case processes, prospective freeports were required to set out how they would manage the risk of illicit activity. Those plans were scrutinised by officials in Border Force, HMRC, the National Crime Agency and others. The Government already require each freeport governance body to take reasonable efforts to verify the beneficial ownership of businesses operating within the freeport tax site and to make that information available to HMRC, law enforcement agencies and other relevant public bodies. Given the nature of the information, we do not think it would be appropriate for the freeport governance body to release that information publicly because it is a third party and does not have the locus to release such information about a business to the public. Furthermore, the requirement would also partially duplicate the people with significant control register at Companies House, where there is already an onus on the company itself to provide information.
I fear that I am running out of time—
Viscount Waverley (CB)
My Lords, I apologise. Would the Minister consider this as a subject for the upcoming Commonwealth Heads of Government Meeting in Kigali? Will he represent the Government in fully engaging with all Commonwealth countries, including the Overseas Territories, so as to encourage the English-speaking world to understand fully all these measures, because they should all engage with this, and we do after all share a common judicial system?
Lord Callanan (Con)
I am sure we will want to engage with all other parts of the world, not just the English-speaking world, through the Commonwealth Heads of Government Meeting. We will want to engage with as many countries as possible to see that this regime is extended.
I apologise; there were a number of other points made that I wanted to answer, but I have run out of time. However, I shall pick up one point made by the noble Lord, Lord Empey, about Northern Ireland. We are working with Northern Ireland Ministers on the devolved matters in the Bill. As he will be aware, due to the ongoing situation with the Northern Ireland Executive we are unable to formally seek a legislative consent Motion, but the noble Lord can be assured that we would not proceed without the support of Northern Ireland Ministers. I have had meetings with Ministers from Northern Ireland and from Scotland to discuss this matter.
I know I have not addressed some points, but I am sure we will examine them in Committee. I have already been speaking for 30 minutes, the hour is late and the Chief Whip is getting unsettled, so I will draw my remarks to a close. We have to respond to this illegal invasion and the Bill enables us to do so. We need to rid this country of dirty money, and I am greatly encouraged by the support given to us by all parts of the House. I apologise for taking a long time over my response, but I commend the Bill to the House.
Economic Crime (Transparency and Enforcement) Bill
Monday 14th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)
Lord Callanan
Member’s explanatory statement
This amendment requires an application for registration as an overseas entity to include the information and statement required by subsection (2A) (information about trusts).
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, we start with a group of government amendments to collect more information about trusts and overseas trust-like arrangements. These amendments address both the concerns raised in the other place by noble Lords on Second Reading in this House. I pay particular tribute to my noble and learned friend Lord Garnier, the noble Lords, Lord Vaux of Harrowden, Lord Faulks and Lord Fox, and the noble Baroness, Lady Jones of Moulsecoomb, all of whom drew attention to this important issue in their speeches.
As highlighted by those noble Lords, there is a particular difficulty with the availability of information about some trusts, including so-called discretionary trusts. This is where the assets are held in trusts to be used at the discretion of the trustees, because the beneficiaries can change. So we need to have some further information captured on trusts in this register, over and above what Her Majesty’s Revenue & Customs already captures on the TRS—trust registration service.
Both Houses can rest assured that this issue was not overlooked by the Government. Officials had already been working on amendments to the Bill, but it was important to table amendments only when we were sure that proposals were workable in practice and that the drafting fully achieved the policy intent. I have had a number of discussions with noble Lords, so I think everybody appreciates this is a complicated technical area.
These amendments set out that where a trustee of a trust—or of an equivalent arrangement that under the law of a country or territory outside the United Kingdom is of a similar character to a trust—is a registrable beneficial owner, the overseas entity must give them an information notice. That notice requires the recipient to provide information about the settlor, beneficiaries and other persons who have rights to appoint or remove trustees or rights over the exercise of the trustees’ functions—sometimes referred to as protectors.
Lord Clement-Jones (LD)
My Lords, I rise to speak to Amendment 17. I am delighted that it has also been signed by the noble Lord, Lord Agnew. This would extend the definition of a registerable beneficial owner of an overseas entity to include anyone who is the beneficial owner of land or property held by the entity.
Why does this matter? Let me give an example. Mr X wants to buy a house in London and sets up an overseas company to own the land. In this scenario, he meets the conditions for being a beneficial owner of a company; the Bill works as intended. However, assume our Mr X rather likes his anonymity, so he approaches a Panama law firm which, after a payment, buys the house for him using its general nominee company which holds legal title to many such properties all beneficially owned by different people. The nominee company issues a declaration to Mr X that it is holding the land as his nominee and that he is the beneficial owner of the property.
In this scenario, the nominee company is the overseas entity owning the property and its beneficial owner is the law firm which set it up. Depending on its ownership structure, the partners at the law firm may or may not appear on the register. However, that is not the point. They may be the beneficial owners of the nominee company but are not the beneficial owners of any of the properties owned by the company. Mr X and the other beneficial owners of the properties held by the nominee company do not tick any of the boxes for being a beneficial owner of that company. The declaration issued by the nominee company is private, so in this scenario they remain anonymous.
Is this what the Government intend? Opening the Second Reading debate last week, the Minister, the noble Baroness, Lady Williams of Trafford, said that the Bill would
“require anonymous foreign owners of UK property to reveal their real identity, ensuring that they can no longer hide behind secretive chains of shell companies.”—[Official Report, 9/3/22; col. 1484.]
That suggests that this is not what the Government intended, and this is where Amendment 17 comes in. By extending the definition of a beneficial owner of an overseas entity holding UK property to include anyone who is the beneficial owner of land or property held by the entity, we would be giving this Bill the scope the Government appear to intend for it.
Responding to last week’s debate in the other House, the Minister there said that if nominee companies were “directed by someone else”—the beneficial owner of the land—then the person doing the directing would be “caught by condition 4” in the definition of a beneficial owner: significant influence or control. But that would only be the case if a separate nominee company is set up for the particular beneficial owner. If a general nominee company is used and this acts for hundreds of different clients, then it is difficult to see that any one of them exercises significant influence or control over the nominee company. That is why Amendment 17 is needed.
Lord Eatwell (Lab)
My Lords, I support the theme of what the noble Lord, Lord Clement-Jones, just said, which is the general weakness of the definition of beneficial ownership in this Bill. It is very striking that in other jurisdictions within the British Isles that hold registers of beneficial ownership and have done for some years, the beneficial owner is always defined as an individual and never as a firm or a trust. An individual who ultimately owns or controls the entity must be identified. The Bill as currently constructed has significant weaknesses, which will prevent the identification of individual beneficial owners in the way that the Government apparently intend but have not as yet achieved.
Lord Vaux of Harrowden (CB)
My Lords, we find ourselves in an unusual position. Normally, this House is trying to knock the edges off overzealous legislation and limit the powers the Government have a tendency to give themselves. In this Bill, we are trying to achieve the exact opposite: to strengthen the powers and close the loopholes so that the powers are as effective as possible.
We are trying to move quickly because of the awful situation in Ukraine. As the Minister said at the outset, the overseas entity register is not an emergency measure—although it will be useful in this situation. In normal times, it would be subject to much more detailed scrutiny, and we would not normally debate such wide groups as we are today. At Second Reading, I asked the Minister to confirm that the follow-up economic crime Bill would be sufficiently wide in scope to allow the matters we are covering now to be considered further, if necessary, as part of that Bill. While the Minister nodded vigorously at the time, he did not give that confirmation in his response. The House clearly accepts the need to move fast, and matters which would normally be voted on will not be pushed to a vote. I hope that the Government will reciprocate that flexibility. Speaking for myself, it would be much easier to accept the flaws and gaps in this Bill, if it were clear that there will be the opportunity to give the more detailed scrutiny which these important issues deserve in due course. Will the Minister please provide that confirmation today?
We all welcome the additional clauses that the Government are proposing on trusts, one of the more common methods to obscure ultimate ownership. Of course, trusts can be—and, as the Minister said, they usually are—perfectly legitimate. However, they can be misused. As such, I commend the Government for introducing these new clauses. That said, and in addition to the points made by the noble Lord, Lord Clement-Jones, there is still one area where an important gap remains: the classic way of camouflaging the identity of the ultimate beneficial owner is by the use of discretionary trusts. These will often have a stated beneficiary, such as a charity, but, because they are discretionary, the benefit can be passed to others who are not identified. That might be under a formal agreement, but it is often something less formal or traceable. In such situations, it can be difficult to ascertain who the real beneficiary is. The identity of “the settlor or guarantor” is one clue— government Amendment 15 rightly requires those to be identified.
The Minister kindly wrote to me yesterday afternoon—I apologise for spoiling his weekend. He said that HMRC already has access to information about beneficiaries through new data-sharing gateways and existing exchange of notes mechanisms. However, this is true only for UK resident taxpayers and for situations where money actually flows. It does not cover all jurisdictions, so the gap remains. Many of the ultimate property owners are not UK residents, and value can pass in different ways—for example, the simple right to use the property rent-free would not be picked-up by HMRC.
One other way of trying to see through such discretionary trusts is to identify who has benefited in the past, including those who have had the use of the underlying property at less than market rent. It would be relatively easy to add a subsection to the Government’s Amendment 15 to cover that, and it would not be difficult information for innocent parties to provide. Is this something which the Government could consider, even if it is in later regulation?
As a general theme, we should not be allowing overseas entities to register unless they are fully transparent. To be honest, the Government’s apparent reluctance to accept clauses which would improve that transparency is somewhat concerning. On that theme, I also wholeheartedly support Amendment 17. It seems rather pointless to have information on the overseas entity, if that still fails to show us who owns the property. I urge the Minister to look at that seriously.
Lord Agnew of Oulton (Con)
My Lords, I shall speak in support of the noble Lord, Lord Clement-Jones, and his Amendment 17. I recognise that the Government have made big strides in the last few days to listen to the concerns which are so widely held. However, given all this effort, and given that the Bill has sat almost ready for four or five years, I feel that we could go further today and do the job properly.
There is no point in legislating for a Bill that leaves huge gaps for more anonymity. I am really sceptical about the need for endless anonymity. The people who strive to have anonymity do not always have it for the right motives. We need to recognise that. I said to the Minister before we came to the Chamber that we spend our lives being entirely reasonable in this country while trying to deal with very unreasonable people. Of course, we must stick to the law, but we need to have the levers in the law which enable us to tackle these bad actors. This is why, in my own slightly layman attempt with Amendment 23, I have tried to bring more focus on the promoters of these organisations. This is to ensure that there is much more responsibility taken by directors who promote organisations, and that they help to provide proper due diligence when working with the sorts of people they are busily defending anonymity for.
Lord Coaker (Lab)
I thank the Minister for the way in which he has engaged with his officials to try to address some of the concerns which have been raised.
I will also pick up the point made by the noble Lord, Lord Vaux, about something which concerns all noble Lords about this Bill: it is going through on an emergency process because we face an emergency, yet not all of it concerns emergency legislation. Of course, the sanctions part is, but many of the other parts of the Bill about overseas entities have been on the stocks for years—as the noble Lord, Lord Agnew, said. Yet the Government have failed to act before now and it is only in the face of this emergency that they have done so. While that is to be welcomed, in some respects, it affects many of the things on which we would want to vote and would want to discuss in great detail, and many of the amendments which your Lordships have quite rightly brought forward which would improve the Bill. On the basis of not tying up this House or preventing this legislation from passing, in the face of the current national emergency, the Bill will go forward in a way which is not as good as it could be. I think that this is a feeling which is generally held across the House. It is certainly how we feel. Of course, we will support the Government in putting this legislation through—but that is not to say that we do not have very serious concerns about aspects of it.
Many noble Lords on Labour Benches and other Benches have raised these issues. Therefore, I very much agree with the noble Lord, Lord Vaux, that the Government need to recognise that the amendments being put forward—even though most, if not all, of them will be withdrawn—seek to do so from a position of needing to strengthen this Bill; it is about time we got hold of a problem which has been identified by many different reports over a number of years. As the noble Lords, Lord Agnew and Lord Clement-Jones, pointed out, transparency is everything. As we go through parts of this legislation and we see exemptions, and parts of the Bill where full disclosure is not to be statutory or guaranteed, one wonders whether it goes as far as it could.
The amendments tabled by the noble Lords, Lord Agnew of Oulton and Lord Clement-Jones, deal with related issues around nominees. We hope that the Minister can offer a full response to the points made by both noble Lords, because they are really important. A lay person reading this would be concerned about the fact that it provides a way to circumvent the regulations.
I thank the Minister for the clarification he made around government Amendments 45 and 47. I am sorry to detain noble Lords, but I briefly remind the House that this is a public document. What if you are not an accountant or someone trained in financial matters? This is the Government’s explanatory statement on government Amendment 45. The Minister has clarified it for me, but many people would think that there is something concerning about the amendment when it says:
“This amendment means that the required information about trusts will be unavailable for inspection on the public register.”
That is the Government’s only explanation of an amendment which they are passing. The Minister has just outlined this.
Similarly, government Amendment 46 states:
“This amendment excludes information about trusts from the definition of ‘protected’ date of birth and residential address information.”
I am sure that there are proper explanations for that. However, sometimes Governments need to be careful. I know the amendment was drafted in haste, but there must have been a better way of doing it.
I accept that there will be many valid reasons for excluding certain trusts from the public register—for example, if one has been established to benefit a child later in life. However, if we had proper time to debate this, an amendment surely could have been brought forward—I would have brought one forward—saying that the exemption could be tied to a specific criterion, rather than being drawn in such a general nature, as it has been. This is another example of the sorts of ways many of us would wish to see this legislation tightened.
We will not stand in the way of these amendments but, as we go forward, I hope that the Minister can give further thought to the very real concerns which have been raised by noble Lords.
Lord Cromwell (CB)
I will just underline one point that the noble Lord, Lord Coaker, made. At Second Reading we got the impression that there was quite a limited list of items that were going to go into the second economic crime Bill. Can we have an assurance at this opening stage from the Minister that he will remain open-minded as to the shopping list of items—if I may use the phrase—which will need to be included, some of which may be revisiting what we have done today but others of which will be entirely new? Can he assure us that it is not a short shopping list?
Lord Cormack (Con)
I just make a very brief point to my noble friend. Because of migraine, I was unable to take part in Second Reading; I had to go home. I was going to make the point then that, if ever a Bill needed continuous post-legislative scrutiny, it is this one. Can my noble friend give an assurance that he will try to set up a special sort of post-legislative scrutiny to look continuously at how the Bill comes into force, what effect it has and where it fails?
Lord Callanan (Con)
First, I thank noble Lords for their comments. I do not disagree with the sentiments of a lot of what has been said. I say to the noble Lord, Lord Coaker, that I absolutely appreciate the points that he has made. This is a very complicated and technical area of law, and I assure noble Lords that we have gone into it in great detail. This morning, I met my noble friend Lord Wolfson, who is a trusts expert, to go through the provisions, and I have examined them closely with Treasury and BEIS officials.
We are doing this to close potential loopholes in trusts; the Government have no other agenda here. This is a difficult area. HMRC has recently established a trusts register for UK trusts, and we want to try to make sure that the same visibility exists for overseas trusts. If an overseas trust buys UK property, its interest is clearly covered and will need to be declared, but there is a potential problem with an overseas entity holding a property, and then that being owned by a trust. It is an attempt to control and close those particular loopholes in this complicated area of law, and what I totally accept are complicated amendments have been worked on at great pace to try to do that. So there is no difficulty and no difference between any of us in what we are trying to achieve with this legislation.
I also happily concede that we may not have got every last dot and comma absolutely accurate and right. One point that my noble friend made to me this morning was that we are if not the first then possibly the second in the world to attempt to do something like this, and it will be an iterative process—it is fair to accept that. A lot of international lawyers and others will be carefully studying this legislation and trying to find ways around it. I can certainly say that, if there are loopholes and if something is presented that we think needs closing, we will absolutely do that, if necessary, in the next Bill—although the full extent of the legislation may not be visible at that stage. But we are committed to doing this, providing that information and giving law enforcement the opportunity carefully to scrutinise many of these arrangements.
In particular, I give the assurance that the noble Lord, Lord Vaux, and possibly my noble friend Lord Cormack, were looking for: the further economic crime Bill, which the Government intend to introduce in the next Session, will be broad. We will, of course, carefully examine and consider any amendments proposed in either House that serve to strengthen our framework for tackling economic crime. I know from my long experience in this House that noble Lords will not be shy in coming forward where they can see improvements that could be made to legislation and where they identify any potential loopholes. There are some fine minds in this House and I am sure that they, along with some of our excellent officials, will turn their attention to doing just that.
I agree with the sentiments; there is no difference between us and what we want to try to achieve, and I am grateful in particular to the opposition parties’ Front Benches, with whom I have had extensive discussions, for their forbearance. I will happily concede that this is not necessarily emergency legislation; we have been trying to introduce this register for a while but until now it has not managed to get the prominence in the public sphere and sufficient priority in the legislative programme to allow it to be brought before this House. As the Minister responsible for it in the House and in my department, I am grateful that we have now managed finally to bring it forward. It will be a useful tool of transparency and of benefit to, first of all, the public, and then to the law enforcement community in attempting to target the small minority of overseas entities that hold property in the UK. Something like 59,000 overseas entities hold property, and the vast majority do so for perfectly legitimate, lawful and legal reasons—but within that there is, of course, a tiny minority we all want to target, and this is our transparency contribution to an attempt to do just that.
I move on to look at the amendments in detail. I thank the noble Lords, Lord Clement-Jones and Lord Fox, and my noble friend Lord Agnew, for their Amendment 17. I am grateful for the meeting that I was able to have with my noble friend Lord Agnew earlier to talk about this issue. As I said, I can see the good intent behind this amendment, but it would be ineffective as tabled—and I shall explain why.
It does not fit within the legislative scheme of the Bill. For example, the Bill provides five conditions for “beneficial owner” in Part 2 of Schedule 2. These five conditions, in general terms, relate to shareholdings, rights or control over legal entities, or other arrangements. Amendment 17 seeks to apply the term “beneficial owner” in the context of a qualifying estate—that is, the land itself—which would not work. Further, the amendment fails to empower overseas entities to obtain the information required which, for the most part, remains undefined.
To be clear, this Bill was designed specifically to capture the beneficial owners of overseas entities. This is because, if the land is held in the name of an overseas entity registered in a jurisdiction with poor levels of corporate transparency, law enforcement agencies here may struggle when investigating the affairs of someone of interest. If they cannot obtain information about the entity itself, they will almost certainly never be able to identify any ultimate economic beneficiary of the land. This register aims to ensure that investigators can find out about the overseas entity to further their investigations. There may be a wider policy debate to be had about capturing ultimate economic beneficiaries of land, but this register, focused as it is on overseas entities and not on land held by individuals or UK companies, would not be the appropriate vehicle.
The government amendments provide robust provisions to ensure that overseas entities provide information about beneficiaries, settlors and other persons who can appoint or remove trustees or have rights over the exercise of trustees’ functions, which some may refer to as protectors, where there is a trustee who is a registrable beneficial owner. These amendments go one step further and also apply where there are overseas arrangements with similar characteristics to a trust and those arrangements’ trustee equivalents are registrable beneficial owners.
The noble Lord, Lord Clement-Jones, suggested that nominees will be used to hide true beneficial owners of property. I point out to the noble Lord that there are regulation-making powers within the Bill allowing for amendments to prevent such abuse, if that is needed. I therefore hope that, with the information that I have provided, the noble Lord and his supporters will feel able not to press Amendment 17.
I turn to Amendments 1A, 22A and 29A, which seek to require a director who is acting as a nominee to provide a statement that they are satisfied by the legitimacy of the financial affairs of the beneficial owner and that the nominee will cease to act if information validating legitimacy is not forthcoming on a timely basis. I appreciate the intent of my noble friend Lord Agnew in tabling these amendments, and I understand that his intention is to further verify the legitimacy of the beneficial owner, to create an obligation for a nominee director to have regard to the financial affairs of those they are acting for, and to validate this legitimacy on a timely basis.
Lord Empey (UUP)
My Lords, I think that everybody in this House, as was the case last week, is on the same page, and we do not want to be seen to be arguing amongst ourselves until the early hours of the morning about something that is so significant. But can I ask the Minister if he and his colleagues in his department will keep a rolling review of this going, even if the gap between this legislation and the next piece of legislation is comparatively short? The last thing we would want is to see some oligarch on the front page of a national newspaper smirking that he or she had circumvented and found some way of actually getting around the will of Parliament and humiliating us. It would be seen, I think, as a failure of policy. I am sure that the Minister is very conscious of that, but it would be helpful if he could tell us that his department will monitor this on an ongoing basis, and not deal with this as a one-off and just leave it to the next piece of legislation.
Lord Clement-Jones (LD)
My Lords, perhaps I could just add to what the noble Lord has just said. The Minister mentioned the regulations which are possible post the passing of the Bill. Will he undertake to review some of the points made during the passage of this Bill and consider whether or not regulations might be needed to fill certain gaps?
Lord Callanan (Con)
Indeed, I am happy to provide the reassurances that both noble Lords have asked for—in the case of the noble Lord, Lord Clement-Jones, in terms of the regulations, and in the case of the noble Lord, Lord Empey, that we see this as an iterative process. As I mentioned, this is fairly unique legislation in the world; we are aware of only one other country, possibly, that has attempted to do something similar. When we introduced the provisions on PSCs—persons with significant control—in relation to UK companies, we had to make some iterative changes to that, as it became evident over time that aspects were not working as effectively as we had hoped. I hope that we have thought of everything on this one, and I hope that we have all of the details correct, but a lot of it—some of it anyway—has been drafted in haste and it is possible that we will have missed one or two complicated international devices. But, the noble Lord can be assured that we will keep it regularly under review, and if there are—I hesitate to use the word “loopholes”, although it is probably appropriate—devices that clever lawyers, of which there are several in this House, find to get around the provisions, we will not hesitate to close them if we need to.
Lord Agnew of Oulton
“(3A) The registrar may request further information to be provided in a timely manner where there appear to be material omissions or suspected false statements.(3B) An application may not be accepted unless the registrar is satisfied that any request for further information has been adequately addressed.”
Lord Agnew of Oulton (Con)
I really want to carry on in a similar vein to earlier comments, and what my Amendment 3 is trying to do is to give more levers to government and enforcement agencies to force out information when we are worried that the information is not clear. My noble friend made the point that the Explanatory Notes say that this will be subject to regulations, but those regulations will be subject to a negative resolution. Could my noble friend confirm that we could be involved in the drafting of those regulations, rather than being faced with a fait accompli at the last minute, because I think there is a lot more to be done here? This perhaps plays to my noble friend’s point about the iterative improvements this Bill is going to need over the next few years, because it is fiendishly complicated.
The other piece to this jigsaw is the likelihood of prosecution of bad actors. Having been in business many years, I am afraid that the phrase that has often been offered to me when one is trying to get things done is “It’s the cost of doing business.” If the fines are so weak and the enforcement so inconsistent, it sends a message to those bad actors to continue, because—let us be realistic—is the NCA or Companies House, or any of these other people, going to take an action against a promoter in the British Virgin Islands for £10,000 of unpaid fees? It is just not going to happen, unless we are very clear that there is a mechanism for that to happen and that the fines very quickly get to a level that makes it worth while for litigators, acting on behalf of the taxpayer and the Government, to do that. I beg to move.
Lord Sikka (Lab)
My Lords, I rise to speak to a number of amendments in my name in this group—there are eight of them—and I will be fairly brief.
First, Amendments 5 and 13 basically ask the beneficial owners and various other parties to provide their former names. In Part 4 of Schedule 1, the Bill requires managing officers who are managing the beneficial owner’s interest to provide their former names. But the same is somehow not required for registerable beneficial owners where they are persons other than individuals—which could be companies that are forever changing their names, or other parties. What I am seeking to do through Amendments 5 and 13 is to, as it were, align the various provisions in the Bill, and I hope that the Government will be agreeable to that.
Amendments 8, 12 and 14 require the beneficial owners, or their managing agents et cetera, to provide a list of any criminal convictions and sanctions against them. At the moment, the Bill does not ask for that kind of information, so it is perfectly possible for somebody to look at this proposed register of property ownership and not know that the ultimate beneficiaries have various convictions, which may well be abroad. It really exerts pressure on them to either come clean or to avoid the UK altogether—which perhaps would be more preferable. Again, it is a fairly straight forward suggestion asking the Government to act upon that.
The meatier part of my eight amendments relate to Amendments 18, 19 and 20, which take issue with the Government’s provision of the definition of registrable beneficial interest, generally taken to be 25% of the shares or voting rights, or somebody having significant influence or control. As it is now defined it is too wide. Indeed, the provision of any number is too wide. If you say it is 25%, it is not inconceivable that half a dozen people will get together and make sure that nobody gets to 25%. If you specify 20%, that will be exactly the same. So four, five or six drug traffickers can get together and own a fraction of a company, and through that they can invest their proceeds in a property. Under this kind of approach, none of them would be identified as a beneficial owner or count as a person of significant control, because they do not meet the thresholds specified in the Bill.
The Bill as presently drafted leaves open the possibility that companies holding UK property would continue to hide the identity of true owners by claiming that there was no beneficial owner. This is already a major problem at Companies House for the companies already registered in the UK. That has been identified by a number of whistleblowers and a number of leaks that we have had. However, rather than tackling the issue, the Government have imported these problems into the Bill, and it is quite likely that the Bill will not achieve its assumed objectives.
So I suggest that there should be no numerical specification of the beneficial interest definition; rather, any interest should be disclosable. It is not every day that ordinary individuals want to buy UK property through opaque offshore companies. They have a reason why they want to do this, so we must make sure that absolutely no door is open to them. By leaving this definition, the danger is that the Bill simply will not achieve its objectives. I therefore recommend my amendments to the Government in the hope that this will help to end the abuses.
Lord Vaux of Harrowden (CB)
My Lords, I support most of the amendments in the group, including the government amendments, which are generally very helpful.
I will speak to Amendment 24 in my name and to the similar Amendment 23, in the name of the noble Baroness, Lady Chapman, both of which are intended to address the possibility of there being a very long period between a change in the ownership of the entity and that change being reported in the annual update. I thank the noble Lord, Lord Cromwell, for his support in this. Amendment 23 would require an update to be filed within 14 days of when a person has become or has ceased to be a registrable beneficial owner. My Amendment 24 is slightly wider, requiring any changes in registered information to be reported within 14 days. However, both amendments seek to bring the overseas entity regime into line with the persons of significant control regime that UK companies must follow. To be honest, I would be content either way.
As the Bill is currently drafted, an overseas entity could register and then immediately change its beneficial ownership and we would not get to know about that for a full year, during which time any number of actions could take place, including the sale of the property to an innocent third party who unwittingly might find themselves enriching a criminal or someone subject to sanctions.
The Bill rightly puts restrictions on the disposition and registration of property, but it does nothing to deal with the more likely scenario of the overseas entity itself, or indeed an entity further up the ownership chain, being sold; indeed, this 12-month grace period almost wilfully ignores that. It seems rather perverse that the overseas entity regime should be more benign than the regime that applies to persons of significant control for UK companies.
In his helpful all-Peers letter of Friday, the Minister explained that the reason they have done it this way is to protect innocent third-party buyers from not being able to register the purchase of a property if the overseas entity turns out to be in breach of the requirement to report a change. That is obviously extremely important. However, a very simple solution is already built into the Bill. The overseas entity has the ability, under Clause 7(8), to shorten the update period and file an update immediately before it sells. Any innocent buyer would simply insist that this happens before the sale is completed, and that would deal with the problem that the Minister explained. Accordingly, I see no reason why one of Amendments 23 or 24 should not be accepted, so that overseas entities would have the same reporting requirements as UK companies have. The whole point of the overseas entity register is that we should know who beneficially owns UK properties. Allowing that information to be potentially up to 12 months out of date cannot make sense. I cannot think of any other corporate register that would allow such a long period to notify changes.
Lord Eatwell (Lab)
My Lords, I will make a couple of observations on the amendments put forward by my noble friends Lord Sikka and Lady Chapman, and the noble Lords, Lord Fox and Lord Agnew. These observations are based on my experience as chairman of the Jersey Financial Services Commission. The Bill as drafted is significantly weaker than the requirements for registration in Jersey. For example, on the point made by my noble friend Lord Sikka, under the Control of Borrowing (Jersey) Order, any interest can be required to be registered without one of these numerical levels.
Secondly, with respect to the amendment proposed by my noble friend Lady Chapman and others, in Jersey, the requirement is that a change of beneficial ownership be registered within 21 days. This 12-month period is really foolish. It provides an open door to misbehaviour.
I support my noble friends Lord Sikka and Lady Chapman and friends in the amendments they have put forward. We should be able to achieve at least the level of seriousness achieved in Jersey.
Lord Cromwell (CB)
My Lords, there is clearly a great deal we can learn from Jersey and I am very happy to follow the noble Lord, Lord Eatwell.
I will speak to Amendment 24, to which I have added my name, and will also make a couple of comments on Amendment 53—there may be a slight sense of déjà vu, as my noble friend Lord Vaux has done the same.
In relation to Amendment 24, on page 3 of his very helpful all-Peers letter of 11 March, the Minister explains that Companies House would not know if a legal entity registered abroad was compliant with the 14-day rule. Likewise, this would not be visible to a third party, whereas that third party could be confident that, if an annual date had passed, the register would be up to date.
I am not convinced that that is so clear-cut or indeed helpful. This approach means that, for up to 12 months, an entity could keep hidden its change in ownership structure. Only at that point would it be in breach if it had not disclosed the change—or possibly multiple changes. Assuming—which may be a bold assumption given some of the entities—that the entity indeed complied with a 12-month date to reveal changes, this would still leave the third party in the dark for up to 12 months and the entity under no obligation to register the changes and having that as a defence. In short, it is possible for entities to game the system by carefully timing their changes. Twelve months, or even one month, can be a long time in business.
This also makes it possible for an entity to waste the time and resources of the acquirer and the regulatory and enforcement agencies if, for example, it becomes subject to sanctions based on its ownership but can claim, at a time to suit itself, that the affected owner or owners actually no longer own it. A 14-day limit greatly tightens the ability of both the registrar and any third party to see, at least in the case of compliant entities, any registered changes in as close to real time as is practicable.
Where entities are not compliant and fail to declare changes in this timely way, should this emerge in due course, it should give the third-party acquirer grounds for withdrawal and the authorities grounds for pursuit. This does leave an obligation on the registrar to ensure that entries are kept up to date, but that is a technological and resourcing issue perhaps better addressed in other amendments. For these reasons, I added my name to Amendment 24 and support it. I urge the Minister to rethink the 14-day requirement.
I shall now make a few comments on Amendment 53. In paragraph 4 on page 2 of the same letter, in relation to the purpose of the Bill, the Minister acknowledges that there will be those who seek to exploit opportunities to avoid it—he also referred to this earlier today. I raised at Second Reading the issue that there are enablers whose approach to reporting suspicions is light-touch or simply to turn a blind eye. I also advocated the idea put forward very eloquently by my noble friend Lord Vaux a few moments ago of having a named senior official on the hook. Simply saying that existing regulations cover this is to deny the evidence that there are entities and enablers in the area addressed by this Bill that have been skirting round existing regulations too easily by claiming ignorance or that suspicion was only mild. I think this may be more specifically reflected in the reference in paragraph 5 on page 5 of the Minister’s letter of 11 March, which says in relation to verification of information that:
“We expect that this will include a role for professionals regulated in the UK by the Money Laundering Regulations.”
This amendment, by including suspicion rather than certain knowledge, covers the loophole by which enablers can claim not to have had certain knowledge even if they should have had reasonable suspicion. This makes it considerably more difficult for enablers and others to look the other way and strengthens the hand of those seeking to hold them better to account. I support this amendment.
Lord Clement-Jones (LD)
My Lords, I shall speak to Amendment 53. I thank the noble Lords, Lord Cromwell and Lord Vaux, for their support, although I understand that they would like to see this tweaked to go further. I also thank the noble Lord, Lord Eatwell, for his supportive comments.
The Bill needs to be comprehensively amended to close the loopholes that currently allow professional enablers to undermine the effectiveness of, and even circumvent, the checks aimed at detecting, disrupting and deterring economic crime. One of the key ways this can be done is by imposing a positive duty on professional enablers to disclose knowledge or reasonable suspicion that misleading, false or deceptive information has been provided to the registrar of overseas entities.
As I set out on Second Reading, professional enablers, such as lawyers, accountants and bankers, are the gatekeepers of economic crime and the Government need to adopt a comprehensive strategy towards them. Given the nature of their work, there is an inherently high risk that these professionals may unwittingly enable economic crime, but there are also enablers that specialise in services aimed at concealing the source of wealth or ownership so as to frustrate the objectives of the law.
This poses a particularly acute challenge in the context of the Bill’s attempt to tighten the checks around the beneficial ownership of property by overseas entities. The UK’s 2017 national risk assessment of money laundering and terrorist financing revealed that 50% of suspicious activity reports related to the legal sector in 2016 were linked to the property market, illustrating that real estate transactions are especially susceptible to money laundering.
As the noble Lord, Lord Vaux, very eloquently deconstructed, the Minister prayed in aid regulation by the Solicitors Regulation Authority and the Institute of Chartered Accountants in England and Wales on Second Reading. Does the Minister really believe that these regulators are the way to tackle these professional enablers? The current model for supervising professional enablers is fragmented and weak. In the legal and accountancy sectors alone, there are 22 different professional body supervisors, or PBSs. In its 2021 report, the Office for Professional Body Anti-Money Laundering Supervision found that the vast majority—some 81%—of these legal and accounting PBSs do not implement an effective risk-based approach to supervising their members as required by the money laundering regulations. Where is the evidence that they can do the kind of job needed to root out corrupt behaviour in sanctions avoidance or as envisaged by this Bill?
In summary, it is critical that the Bill addresses the heightened risk that professional enablers, particularly conveyancers and lawyers, will frustrate the objectives of the register of overseas entities. Beyond this modest amendment, urgent reform is needed—I hope it will take place in the second Bill—to ensure that there is effective, comprehensive supervision of professional enablers. This should be fully addressed when we come to the second economic crime Bill.
Lord Rooker (Lab)
My Lords, I had not intended to speak today. I came to learn and listen to the experts on areas I do not know much about. But listening to the noble Lords, Lord Cromwell and Lord Clement-Jones, I am reminded of an example. I know this would not be classed as money laundering, but the well-known spiv, Aaron Banks, was responsible for what is, I think, the biggest political donation in British history—I think it was £8 million—during the Brexit referendum period. When it came to investigation by the Electoral Commission, which had the responsibility for doing this, he was not an unwitting enabler. His conclusion was, “We’re cleverer than the regulator.” The Minister does not want to be faced with that during the passage of this Bill and its actions, so he would be very wise to accept the spirit of some of these amendments.
Baroness Jones of Moulsecoomb (GP)
I think it is obvious that the Minister will accept a lot of these amendments, because they are from people who are much cleverer than most of us in this Chamber.
I support most of the amendments—even all the government amendments, because they are quite helpful, particularly those that require the disclosure of whether any beneficial owners of property are subject to sanctions, and the strengthening of the criminal offences for false declarations. However, it is obvious from the speeches of other noble Lords that the Government are still falling short and that the Bill needs to be tougher. For example, Amendments 23, 24, 57 and 58 all need to be inserted into the Bill.
All beneficial interests should be registered, not just those acquired on or after 1 January 1999. That is a completely arbitrary date and should be removed. The Minister shakes his head; I guess he will argue that it is a very important date. I disagree.
This legislation is being rushed through as an emergency, but the Government are content to wait another year, following initial registration, before any changes in beneficial ownership take place. I cannot see the logic in that and I think most people will not either. It makes much more sense to update the register within 14 days of any changes.
Lord Fox (LD)
My Lords, this is the first time I have spoken today. I will make a couple of points from the Front Bench that reflect on the other groups as we debate them.
We on these Benches share the hopes of the Government and, indeed, Her Majesty’s loyal Opposition to get this Bill on to the statute book as quickly as we can. For that to happen, the Government seem to be moving on a number of issues, which will be helpful. For our part, we have had to suspend the level of scrutiny that this Bill would normally attract. That has been difficult for us because, as we heard at Second Reading and have already heard in debate on the first group, much could be done to improve and extend the Bill.
As such, and as we have already heard from the noble Lords, Lord Vaux, Lord Cromwell, Lord Cormack and Lord Empey, there are a number of solid assurances that the Minister can give us—he hinted without necessarily assuring in his response to the previous group. We would appreciate an undertaking from the Minister that, when we return to this topic on the second part of this Bill, or ECB 2 as we now have to know it, there will be a frank assessment from the Government as to the operations of ECB 1, and a chance to debate and modify ECB 1 in the light of that frank assessment.
Further, the four planned elements of ECB 2 were set out by the noble Baroness, Lady Williams, at Second Reading. They indicate a fairly narrow—indeed, dangerously narrow—focus for that Bill. A commitment from the Government that they will enable that Bill to be broadened, and that some of the issues we have already heard and some more that we will hear later will be added to the curriculum of that Bill, will be very important.
This is a large group of amendments; noble Lords will be pleased to know that I will not take them one by one and summarise them all. There are a number of amendments from the Government, which we welcome, but I will briefly highlight Amendment 24 in the names of the noble Lord, Lord Vaux and Lord Cromwell. We have heard from them so I will not reiterate their speeches. We believe that this important issue is possible and do not see why it is not something the Government could easily incorporate in the current form of the Bill.
I will primarily speak on my noble friend Lord Clement-Jones’s Amendment 53, to which the noble Baroness, Lady Chapman, and I have added our names. We have heard today and at Second Reading that this is the issue that hits at the heart of the problem we face, and the scale of the infiltration of stolen wealth that has come into the United Kingdom. It is why the kleptocrats have been so comfortable here: they have been feather-bedded by a welcoming committee of enablers, anxious to claim new clients and get some of the money. For some so-called enablers—indeed, most of them—that temptation was outweighed by their moral and practical concerns. We should note that clearly. Unfortunately, for others, such as the sorts that the noble Lord, Lord Vaux, identified, the temptation has been too great. A significant minority of practitioners have taken the “ask no questions and tell me no lies” philosophy to doing business.
This amendment would really do no more than reinforce what should be happening already, but it restates it in a different way. Within each of these enabler services, there needs to be a senior partner or director who signs off on the due diligence and is accountable to the law for doing so.
In closing, I note a briefing from the Law Society that arrived in my inbox this morning. It expressed concern about this amendment. The pressure group said that the amendment appears to extend a duty of due diligence to all stages of client take-on and transactional/advisory work. Its concern was that it would
“create a significant burden on professional services such as law firms that would be difficult for them to meet”.
In other words, this due diligence would be too hard to do. That tells us that there is work to be done in this area.
Lord Coaker (Lab)
My Lords, this is yet another group of amendments with contributions from across the Chamber that signifies some of the problems we have in fast-tracking this part of the Bill. Many noble Lords, including my noble friend Lord Sikka, have put forward sensible amendments that would improve the Bill, but we cannot accept them because we are in a rush to get it through. They are common-sense amendments. I take very much the point that the noble Lord, Lord Empey, made: if we are not careful we will have a situation where we pass the Bill and, in a week or a couple of months’ time, there will be an oligarch, a kleptocrat or whatever you want to call them—somebody living off dirty money—on the front pages of the papers parading themselves as having got round what the Government have only just passed.
Of course, that is the whole purpose of the amendments that so many noble Lords have put forward: to say to the Government that they have to address some of this. If they cannot address it in this Bill, which clearly they will not be able to do because it is emergency legislation—we all accept the crisis in front of us—let us have a cast-iron guarantee that the second economic crime Bill will come quickly to address these various issues and that we will be able to come back to them. Those are the reassurances that so many of us are looking for from the Government. I do not think that is too much to ask.
As my noble friend Lord Rooker pointed out, with his normal passionate use of the English language, we do not want a situation where people—I cannot remember who he referred to—parade around saying, “Look, we’re cleverer than the regulator.” That undermines democracy and Parliament. It undermines all of us. That is how serious it is when people flaunt their ability to circumvent the law. That is not in our interest, whatever the crisis we face. I know that the Minister would accept that.
I am grateful to all noble Lords who have tabled amendments in this group, which cover a variety of non-trust provisions relating to the register of overseas entities. I should give my noble friend Lady Chapman’s apologies. She cannot participate in proceedings for personal reasons, but she tabled Amendment 23, which, like Amendment 24 in the name of the noble Lord, Lord Vaux, seeks to accelerate the reporting of changes in beneficial ownership, for reasons ably supported by my noble friend Lord Eatwell. Again, this seems absolutely common sense; it does not seem to be a point of argument.
The Government are keen to stress that the vast majority of entities that apply to join the register will be entirely above board. We accept much of that. However, under the current provisions, a shell company could be registered under certain ownership on day 1, with new appointments to the board made on days 2 and 3, but it would be required to report that only 12 months later. That is clearly not acceptable or sensible. As my noble friends Lord Sikka and Lord Eatwell, the noble Lord, Lord Vaux, and others said, something should be done about that. The Government should see what changes they can make.
There are legitimate questions about enforcement, but do the Government agree that there should be a general principle that entities need to be proactive in reporting changes? The Minister should accept Amendment 23, or indeed Amendment 24, but if not, he should commit to giving this further thought as the Government begin to draft the next piece of legislation.
We are also sympathetic to other amendments in the group, including Amendment 3 from the noble Lord, Lord Agnew, and Amendment 53 from the noble Lord, Lord Clement-Jones, supported by my noble friend Lady Chapman and the noble Lord, Lord Fox, which tries to start to deal with enablers. On so-called enablers, it would be helpful to understand what steps, if any, the Government have taken since Russia invaded Ukraine. As this is an emergency piece of legislation, what emergency action have the Government taken with respect to enablers? There have long been stories of lawyers and estate agents who purposely avoid asking their clients probing questions because they know that the answers would preclude them from doing business with them. It is time to say, “Enough is enough and we will seek you out and do something about it.”
We know that some individuals have sought to urgently offload their UK-based interests and, if they are seeking to rush sales through, we would hope that estate agents and others were already querying the reasons for that. In addition to any steps that might have already been taken, what steps do the Government plan to take over the coming days and weeks to deal with that problem? This series of amendments asks various questions, but ultimately seeks to tighten up a Bill that is in all our interests.
Lord Callanan (Con)
First, I thank all noble Lords who have contributed to this debate. Before I address the amendments tabled, I reiterate the point I made earlier. This will be almost the first register of its kind in the world. We should accept that we are leading on this. I completely accept that we may not have everything perfect, but we will learn as we go—just as we did, in the example I cited, when we implemented the people with significant control requirements for domestic companies. We had to learn and iterate that, and now many other countries have followed our lead. That is a good thing. I re-emphasise that we will be perfectly willing to revisit these measures if it transpires that we have not got everything quite right.
Lord Eatwell (Lab)
Just thinking off the top of my head, I can think of four registers of this ilk which exist already.
Lord Callanan (Con)
I would be happy to debate with the noble Lord. When I queried this, my information was that Germany potentially has something similar, but nobody else. I am happy to exchange letters with him about numbers, but that is not the information I have.
Before I move on, perhaps I may correct something I said on the first grouping—which will teach me to pluck numbers from memory rather than consulting my notes. The correct figure is that there are 30,000 overseas entities registered in the UK owning approximately 95,000 properties. I think I may have said that the other way round. I slightly disagree with the noble Lord, Lord Sikka. The vast majority of those are perfectly legitimate entities. We are an open trading environment and welcome investment from all over the world. International companies owning headquarters in the UK do so perfectly legitimately. The vast majority of these entities are legitimate. A small minority are not, and they are the ones we seek to catch in this register, but we must be fair to the vast majority which are perfectly legal, above board and just seeking to use the UK to do business, which we encourage.
Let me also pick up the points made by the noble Baroness, Lady Jones. Although I am grateful that she is supporting the government amendments—I will write that down for posterity, because I am not sure it will happen again—we did not just pluck the dates of 1999 for England and Wales and 2014 for Scotland out of thin air. We did not just sit there and think what date we would make it retrospective to. Those were the dates of incorporation when that was required by the Land Registry, so it is appropriate to go back to them. Northern Ireland has never required this, so it is impossible to retrospectively apply the provisions there. I hope she will accept that we did not just make these dates up; they are put in place for a reason.
Lord Sikka (Lab)
I refer the Minister to an entity called Business Bank Italy Ltd. It was owned by a convicted Mafia person from Italy, who registered this bank here and it had a website inviting wealth management. At Companies House, there was absolutely no declaration of any criminal convictions. Previously, the same person registered as secretary and director of another company, where the same person provided information in Italian. When it was translated into English, it read, “My name is the Chicken Thief, my occupation is a fraudster”, and the address was “Street of 40 Thieves, town of Ali Baba in Italy.” There is no information on whether there was any criminal conviction or anything else. The Minister just said that there are robust checks at Companies House. Where are these robust checks? I could pick out that example. Companies House did not carry any out; neither did any government department. As he knows, I have been filing a lot of Written Questions of late drawing Ministers’ attention to all kinds of strange goings-on in companies. It seems to me that, by rejecting the idea that somebody has to provide their former names and a record of criminal convictions and sanctions, the Government are opening the door for these people to misbehave.
Lord Callanan (Con)
We are not opening the door. I assume that the companies the noble Lord is referring to are existing UK-registered companies; I know he has asked me a number of Written Questions about companies registered on the UK database, and I totally accept his point. He is pointing out an issue we are well aware of: that the existing UK companies register is a dumb register. The registrar is obliged under existing law to accept the information tabled to her. The noble Lord has raised a number of examples and tabled Written Questions to me about some patently ridiculous information that has been supplied. I get regular correspondence from noble Lords and from constituency Members of Parliament where false information is given and false companies registered at people’s addresses, unknown to them, and they then receive correspondence.
The difficulty at the moment is that the registrar does not have the legal power to query the information registered to her. If the noble Lord will be patient and wait for economic crime Bill part 2, which is coming, he will find that it will deal with this precise point. It will give the registrar the ability to query that information and provide that people must give identity details, passport information, et cetera, when they register. This is a massive change to the operation of Companies House—the biggest change for something like 170 years to the register database. It will give the registrar the power to query that information and people will have to provide evidence of their identity, addresses, et cetera. The noble Lord is right—there are a number of ridiculous examples—but we will deal with that. I am aware of it, and it will be in the next Bill.
In addition, information regarding designated persons who are listed on the UK sanctions list is already published for free via GOV.UK by colleagues in the Office of Financial Sanctions Implementation.
Finally, the verification mechanisms of the register, which will be provided for under Clause 16, will ensure as far as possible that the information provided is highly accurate. This register will provide vital information and in turn give enforcement agencies even greater information to take actions and carry out their own investigations. Therefore, on balance and taking into account the reasoning we have set out, we are unable to accept these amendments.
However, I am in agreement with the noble Lord on the particular importance of ensuring that there is clear information for users of the register about whether individuals identified as beneficial owners of the overseas entities are subject to UK sanctions. It is in the public interest for users of the register of overseas entities to be able easily to see whether a registrable beneficial owner is a designated person listed on the UK sanctions list.
The Government have therefore tabled their own Amendments 7, 9 and 11, which would mean that the required information about a registrable beneficial owner will include information about whether they are designated by virtue of the Sanctions and Anti-Money Laundering Act 2018. These three amendments would require overseas entities to confirm whether any of their registrable beneficial owners are designated persons listed on the UK sanctions list. It would be an offence not to do so. This information would be displayed publicly on the register. This will ensure that this information is then more easily accessible to the average user of the register. That fulfils a requirement raised by a number of noble Lords, and by Members of the other place when they debated this legislation. I hope that the noble Lord, Lord Sikka, will appreciate that these three amendments will deliver a good deal, if perhaps not all, of the intention of his amendments and those proposed in the other place.
I move on to Amendments 18, 19 and 20, also tabled by the noble Lord, Lord Sikka, which relate to the level of shareholding that would define a “beneficial owner”. His amendments seek to remove the 25% level altogether, to capture any person who holds any shares in the overseas entity in scope.
The 25% threshold contained in the Bill is in line with global norms with regards to beneficial ownership. The Financial Action Task Force, which sets global anti-money laundering and counterterrorist financing standards, has found that this threshold is acceptable as an example of how to determine beneficial ownership. As a result, 25%—or more than 25%—is used in many jurisdictions, such as in the US and in the European Union’s recent anti-money laundering directives. The 25% threshold also follows the UK’s PSC—person with significant control—regime, which similarly requires beneficial ownership information of UK-registered companies. When the PSC regime was in development—
Lord Burnett (LD)
Does the 25% limit cater for class rights in the definition of control? In other words, you can have 10% and 90% but the 10% have all the voting rights.
Lord Callanan (Con)
I think it refers to rights of control—the actual percentage shareholding of the company—but if I am incorrect on that, I will certainly write to the noble Lord.
When the PSC regime was in development, significant analysis, including consultation, considered the question of thresholds. The threshold of more than 25% reflects the level of control a person needs in voting rights, under UK company law, to be able to block special resolutions of a company. It was considered that 25% represented the optimum opportunity to understand who is in a position to exert significant influence and control over a company. Collecting information on legal ownership below that threshold would be much less likely to do this. Removing the threshold altogether would have the effect of essentially creating a register of shareholders rather than a register of beneficial ownership, which—I hope noble Lords will agree—is not appropriate for the purposes of the Bill and the transparency involved in this register. Maybe the noble Lord, Lord Sikka, likes going through thousands of register entries, but I am not sure it would be helpful to most people.
For entirely legitimate entities, there could be hundreds or thousands of shareholders. For instance, think of a large foreign company that owns property in the UK. I am really not sure whether it would be tremendously helpful to have literally thousands of individual shareholders on the list of a property’s beneficial owners. For example, in the case of public limited companies with highly dispersed ownership, where shares can be bought and sold frequently and instantly, removing the 25% threshold would make the requirements of the register disproportionately difficult to comply with, as entities must first send a notice to those that they believe are their beneficial owners, and then allow time for potential beneficial owners to respond.
We are mindful of the risk that an individual wishing to disguise their beneficial ownership might, for example, deliberately reduce their shareholding. We have considered this, and so have made provision that means that anyone, regardless of their shareholding or voting rights, who exerts or has the right to exert significant influence or control over an entity is captured within the meaning of “beneficial owner”. This includes anyone who holds the right to appoint or remove a majority of the board’s directors. Perhaps that takes account of the point the noble Lord made earlier.
I am sorry that the noble Baroness, Lady Chapman, cannot be with us today. I thank her and other noble Lords for Amendments 23 and 24. In particular, I thank the noble Lord, Lord Vaux, for his engagement and for the points he has made. I am very happy to meet the noble Lord to discuss these matters further.
These amendments would require overseas entities to update the register not just annually but when there has been a change in beneficial ownership. I know this matter has been exercising a number of noble Lords. It was also raised in 2018, during pre-legislative scrutiny of the then draft registration of overseas entities Bill. At the time, the scrutiny committee accepted fully in its report that this requirement would be difficult to enforce without active investigation. This would also create great uncertainty for third parties transacting with the overseas entities. This is the key reason why we have adopted the 12-month threshold.
A change in beneficial ownership is not necessarily foreseeable and would not be knowable to any third parties, including Companies House, without detailed investigation. As I said, there are about 30,000 of these overseas entities. As such, a requirement for an overseas entity to update its information when there is such a change means that, at any point in time, it could be compliant one moment and then not compliant the next. Our problem is that we think this creates significant legal uncertainty for any third parties engaging with the entity and seeking to purchase the property from it.
Lord Cromwell (CB)
Can the Minister help me and explain why they would be non-compliant if they had two weeks within which to register it? As long as they did it within two weeks, they would be fine.
Lord Callanan (Con)
Yes, but they would have to be tabling notices to any potential beneficial owners in order to update the register. We think that if we have a yearly update, any third party transacting with that entity would then have sufficient legal certainty to be able to proceed. The point is not that the entity might not register the change of ownership but that the third party, and indeed Companies House, have no way of knowing whether it has. Therefore, a third party could engage in a transaction thinking that the original entity is compliant and then discover afterwards that it has not updated its register and is non-compliant, and therefore potentially lose its money and be unable to proceed with the transaction because it cannot register the property. On balance, we think the better option is to have a yearly update cycle, but I realise that this is a point of debate and I am happy to discuss it further. I know that the noble Lord, Lord Vaux, is engaged in this.
Lord Vaux of Harrowden (CB)
The Minister has not addressed the point that this can easily be dealt with by bringing forward the annual update, which a company has the ability to do under—I think, from memory—Clause 7. If that were done as part of the property transaction, that solves the problem completely. Does the Minister disagree with that?
Lord Callanan (Con)
No, I do not disagree with that. It is, of course, perfectly possible—
Lord Eatwell (Lab)
My Lords, on the same point, would it not be helpful for a third party to know who it is actually dealing with? Under the Minister’s proposal for 12 months, it could rely on the register and find out that it is dealing with someone it had not expected at all.
Lord Callanan (Con)
Indeed it would be helpful, and that is why we have the transparency of the register in the first place. Returning to the point made by the noble Lord, Lord Vaux, it would indeed be possible for them to update it, and it is of course perfectly possible that the advisers of the third party buying that property would wish to say to the entity that they wanted it to update the register in terms of formal ownership before they could advise their clients to proceed with the transaction, which is a point that the noble Lord made to me. That is different in terms of due diligence of the third party’s financial legal advisers, but in terms of the legal requirements, we think that it is best to leave it at 12 months. However, maybe we could have further discussions on this before we get to the second Bill.
To summarise, a change in beneficial ownership is not necessarily foreseeable and would not be knowable to any third parties, including Companies House, without detailed investigation. As such, a requirement for an overseas entity to update its information when there is such a change means that it could be compliant one moment and non-compliant the next, at any point in time. Our point is that this would create significant legal uncertainty for any third parties engaged with the entity.
I remind noble Lords that the key sanction for non-compliance with the new register—apart from the criminal penalties for non-compliance—which interferes with existing property rights is effectively to make it impossible for the buyer to then register title, if purchasing from a non-compliant entity. Of course, if they have transacted with an overseas company in a different jurisdiction, it might be very difficult for them to then take appropriate legal action to recover any sums that they have paid. This is not about providing a free “get out of jail” card for the overseas entity; it is genuinely about protecting the rights of third parties that wish to transact with them.
As the noble Lord, Lord Vaux, pointed out, the onus is on the buyer and their agents to ensure that they do not transact with a non-compliant entity. In order to protect the buyer, who is likely to be an innocent third party, it follows that there must be absolute legal certainty in every case as to whether the overseas entity doing the selling is compliant. An annual update with a transparent end date for the update period will give third parties transacting with the overseas entity the certainty that they need. The annual update already requires an overseas entity—
Lord Cromwell (CB)
I do not wish to be argumentative with the Minister—well, perhaps I do—but can he confirm in respect of the third party buying the company that that company will be compliant even if, say, 11.5 months ago, they changed their ownership because they will not have had to register?
Lord Callanan (Con)
Yes, that provides the required legal certainty to the third party that is buying it, at the expense of, perhaps, a certain amount of transparency for that 11.5-month period. So, yes, I accept that.
The annual update already requires an overseas entity to provide information about its current beneficial owners, as well as any changes since its last update. This latter information was added as a result of the pre-legislative scrutiny of the Bill, providing a complete picture of an overseas entity’s beneficial owners. For these reasons we do not believe a change in the updating period is necessary or desirable, and I therefore encourage noble Lords not to press their amendments.
Turning to government Amendments 49, 50, 51 and 52, the Government have listened to the concerns raised about the need to deal effectively with anyone seeking to file false or misleading information or those who know or suspect that they may be filing false information, and we have taken on board those concerns. I thank all noble Lords who raised these concerns with me. They made the point that the evidential threshold to prove intent or recklessness is too high in the clauses as drafted. I have therefore tabled these government amendments to ensure that those who provide false or misleading information “without reasonable excuse”—in other words, a lower legal barrier—can be prosecuted and are subject on conviction to an unlimited fine. This will catch those who seek to facilitate and enable money launderers and the corrupt.
Furthermore, we have amended the threshold for what, under our amendments, constitutes an aggravated offence. This removes the reference to the word “recklessly”, which caused a lot of concern in the other place and to the noble Lord, Lord Fox, and others in this place. It also retains the potential for imprisonment and an unlimited fine if convicted of the aggravated offence of knowingly filing false, misleading or deceptive information. I hope this addresses the concerns.
I thank the noble Lord, Lord Clement-Jones, for Amendment 53, which would create a criminal offence of failing to disclose to the registrar certain information when a professional knows or suspects, or has reasonable grounds for knowing or suspecting, that misleading, false, or otherwise deceptive information was provided to them in their professional capacity. Again, I understand the noble Lord’s motive for proposing this new clause, but I hope that he will agree that his aims can be met by the existing provisions in the legislation regarding offences for the provision of false information, as developed in the way I have just set out by the Government’s amendments to lower the threshold needed for prosecution. We are confident that this will ensure that enforcement agencies have sufficient capacity to tackle those who seek to subvert the integrity of the register through the provision of misleading information.
I also take this opportunity to reassure the noble Lord—
Lord Clement-Jones (LD)
My Lords, I am afraid I do not agree with the Minister; I am amazed that he thought that I would. The Government need a strategy to catch these enablers in the way that they currently operate. What strategy do the Government have? The Minister was just about to pass on to other things. He has prayed in aid the professional regulators, such as the SRA and the ICAEW, and he has more or less said that the legislation is absolutely fine: it will catch the enablers properly. But does the Government not need a proper strategy for dealing with enablers? They cannot gloss this over. Is the Minister prepared to look at this carefully before the next Bill?
Lord Callanan (Con)
Of course, we are constantly looking at these matters. The Treasury is implicitly engaged in pursuing crackdowns on the so-called enablers that the noble Lord has mentioned, and the anti-money laundering regulations exist. This register, which is a transparency measure, is designed to provide information to the public, HMRC and other law enforcement agencies that can then take the appropriate action under the other provisions. However—before the noble Lord, Lord Fox, gets up—I totally agree with the noble Lord that we need to look again at whether the anti-money laundering statutes are appropriate. It is not for this legislation, but I am sure it is something we will want to look at in detail before we get to the next Bill, because it is a complicated area of law. If we do not, I am sure the noble Lord will wish to table his amendments again then.
Lord Fox (LD)
Each time the Minister speaks on this, I do not hear him acknowledge that there is a problem. In order for there to be a solution, there has to be an acknowledgement that there is a problem. So, does the Minister agree with me that there is a problem with unscrupulous enablers currently operating in the City and the United Kingdom? Unless the Minister agrees, I do not think that we can have much hope of a solution.
Lord Callanan (Con)
I am happy to agree with the noble Lord. If there is one firm of accountants or one legal practice that is turning a blind eye to these provisions, there is a problem with which we need to deal. Nobody wants to see that; we want to give the UK a reputation as the best place in the world to do business and to crack down on the small minority of the legal profession that are abusing their position and facilities—of course we would want to do that.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister and slow the proceedings but, on that point, the Minister began to move, gradually, towards thinking about the enablers, and mentioned anti-money laundering legislation. But it is wider than that: it is about sanctions, economic crime in general and the provisions of this Bill. Is the Minister prepared to undertake to look more broadly across the piece?
Lord Callanan (Con)
Yes. Obviously, a number of different government departments would be involved in doing this, but a number have been involved in putting the provisions into this Bill, and a number will be involved in the provisions of the next economic crime Bill. Of course, we want to take action against lawyers and accountants who abuse their positions to benefit some of these oligarchs and others. We have all seen the press reports and we all know the people that we are concerned about. I would not seek to defend them in the slightest, and I hope that we will be able to put the appropriate sanctions in place to deal with them.
Lord Cormack (Con)
Does my noble friend think it would be a good idea to set up a Committee of your Lordships’ House immediately after the Bill has gone on to the statute book, like these special Select Committees that are set up for specific purposes, so that you have a number of knowledgeable Members of your Lordships’ House, among whom I do not include myself, who will be able to provide expert examination of this Bill on a continuous basis?
Lord Callanan (Con)
The noble Lord often suggests setting up special Committees of this House. He will know that it is way above my pay grade to dictate to the House authorities what committees they wish to set up for examining particular Bills. I know from appearances that there are some extremely good and effective committees already in this House examining all parts of the Government’s legislative agenda and all departments—but, if the noble Lord can forgive me, I will not get into instructing the House authorities on what committees to set up to future scrutinise our work.
Relevant firms, including financial institutions, law firms, accountancy firms and estate agents, under the anti-money laundering framework, must inform Her Majesty’s Treasury as soon as practicable if they know, or have reasonable cause to suspect while carrying out their business, that they have encountered a person subject to financial sanctions, or a person who has committed a financial sanctions offence. They must state the information on which the knowledge or suspicion is based, and any information they hold about the person by which they can be identified. It is already an offence to fail to comply with this reporting obligation. I understand that the noble Lord does not think that the legislation is applied properly—perhaps we can look at that—but there is already an offence on the statute book.
Activity which seeks to evade these new beneficial ownership reporting obligations should be taken into account in the course of these firms taking a risk-based approach to anti-money laundering, and any suspicions of sanctions evasion should be reported in accordance with their legal obligations. I am pleased to say that Treasury Ministers will be writing to the anti-money-laundering supervisors of the relevant professional enablers on this matter, highlighting that the Government will be expecting everyone in these sectors to be particularly vigilant.
I hope that, with the reassurances that I have provided on this important issue, the noble Lord will feel able to withdraw his amendment.
Lord Vaux of Harrowden (CB)
The Minister was kind enough to offer to meet with me about my Amendment 24. I actually asked about meeting regarding the verification regulations in Clause 16. Is he prepared to do that, probably with others, as it is very important that these regulations get the input of all these highly intelligent people around the Committee before they are issues, rather than afterwards?
Lord Callanan (Con)
Yes, I am happy to meet with the noble Lord and his colleagues to discuss that matter.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
I advise the Committee that if Amendment 33 is agreed to, I cannot call Amendment 34 by reason of pre-emption.
Amendment 33
Lord Callanan
“(i) is entered, on or after 8 December 2014, as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland,”Member’s explanatory statement
This amendment expands the scope of circumstances where an overseas entity is registered as the proprietor of a relevant interest in land for the purpose of Clause 9 (to include, for example, Keeper-induced registration) by removing the requirement for there to have been an application for registration.
Lord Callanan (Con)
My Lords, I start this grouping by speaking to the government amendments, which I have tabled. They are Amendments 33, 75 and 76; 35, 36 and 37; 63 and 77; 65, 66, 69, 70 and 72; 68 and 71; and 73 and 81. I hope that everybody is taking careful note, because there will be a check later.
These are technical amendments relating to land registration in Scotland, tidying up some of the drafting in the Bill. If it would be of assistance to noble Lords, I am happy to speak in more detail on any of these, but meanwhile, in the interests of time, I will move on to the more substantive government amendments in this group.
Amendments 73 and 74 make small but important technical changes to the Bill to ensure that Schedule 4 operates effectively in line with the land registration law of Scotland. These amendments add to existing provisions when an application must be rejected by Registers of Scotland because of the implications for who will be shown in the Land Register of Scotland as the owner of a plot of land. These amendments ensure consistency and clarity in setting out the circumstances in which a prescriptive claim application might result in a prescriptive claimant being provisionally entered as the owner of a plot in Scotland.
I am mindful that several noble Lords and Baronesses, including the noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Fox and Lord Sikka, have tabled amendments to shorten the transition period proposed. To inform that debate, I thought it might be helpful to set out several government amendments that we hope will help to ease concerns about the length of the transition period for registering retrospective property ownership and the perceived risk of people moving illicit assets in the meantime—a concern that has been raised with me by several noble Lords.
Amendment 86 requires overseas entities when registering, who have disposed of certain land between 28 February 2022—the date that the Bill was published—and the date of their application to register, to submit a statement with their application setting out details of what has been sold and the beneficial ownership of the entity immediately before that transfer of title. The land in scope is that which otherwise would be caught by the transition period: that is, land that was registered after 1 January 1999 in England and Wales and after 8 December 2014 in Scotland. The noble Baroness, Lady Jones, now knows why we have selected those dates.
This is an anti-avoidance measure. It would mean that any overseas entity disposing of any of their property in the period from 28 February and the date of their application to register on the register of overseas entities must provide information about the entity’s beneficial ownership immediately before the disposal. They must provide that information by the end of the transition period. This will mean that law enforcement will therefore have access to a record of the beneficial ownership to aid the enforcement of historic cases, and the seller would no longer be able to avoid being under a legal duty to provide beneficial ownership information by disposing of a property in advance of registering—something that I know was a significant concern for many noble Lords. This new disclosure requirement should significantly strengthen law enforcement’s abilities to investigate and prosecute both buyer and seller, and all involved in the transaction, should the criminal law have been broken.
Crucially, it addresses the concerns that have been raised with me in both Houses that corrupt people must not be allowed to sell up and escape the transparency that the register will bring. It is my submission that this measure will be more effective than any further reduction in the transition period, which risks opening up the provisions of the register to legal challenge, something that would no doubt be exploited by those wishing to avoid it.
Amendments 55, 60, 64, 79 and 82 align the transitional periods under Schedules 3 and 4 with the period in the new clause inserted by Amendment 86.
Amendment 87 supplements Amendment 86 by making it an offence for certain overseas entities who do not apply for registration during the transitional period, and every officer in default, to fail to provide information equivalent to that required by Amendment 86. That means information about relevant dispositions in land made on or after 28 February 2022 and the end of the transitional period. In the case of continued contravention, an offence is also committed by every officer of the overseas entity who did not commit an offence in relation to the initial contravention. A person guilty of an offence is liable on summary conviction to a fine and a daily default fine of up to £2,500 a day in England and Wales.
Amendment 88 makes further supplementary provisions, including a power to make regulations in connection with the new clause inserted by Amendment 86.
Amendment 59 reflects the revised transitional period of six months. It requires the Chief Land Registrar to act as soon as reasonably practicable, and in any event before the end of the transitional period, to enter a restriction in relation to an estate in land owned by an overseas entity that became the registered proprietor of that estate following an application made before commencement of the Bill.
Amendments 66, 69, 70 and 72 are technical amendments relating to land registration in Scotland. In the interests of time, I propose to move on to other substantive amendments, but am more than happy to speak on these amendments in more detail if required. I beg to move.
Lord Sikka (Lab)
My Lords, I apologise; I am not sure if it is my turn or someone else’s. I have four amendments in this group. I have listened carefully to what the Minister has said about Amendment 86. The real problem is that you can have an overseas entity that can be used to buy a property in the UK. When that property is sold, money is laundered, but before the six-month period is over the overseas entity is liquidated so there is no information of any kind to file. By giving anyone more than 14 days—this is a theme referred to earlier by the noble Lords, Lord Cromwell and Lord Vaux—the Government are inviting these kinds of cat-and-mouse games.
I recommend that no one should have more than 14 days. After all, that is what we give at the moment to UK companies to file information about persons with significant interest as per Part 21A of the Companies Act 2006, which says that the PSC’s details must first be recorded in the company’s internal register within 14 days of the change and Companies House must be notified within a further 14 days, which is the maximum permitted. So why are overseas entities to be given a longer period? We seem to be creating an opportunity here, a window, for these entities to misbehave, and at the end no declaration of any kind can be made. Fourteen days is not too demanding in the era of electronic filing. We must close all opportunities for anyone to circumvent the filing requirements and thereby get away with basically laundering their proceeds.
My second two amendments are Amendments 58 and 67, which, as has been referred to, are about the amnesty that is built into the Bill. The Bill grants amnesty from disclosures to those who acquired property in Scotland before 8 December 2014 and before 1 January 1999 in England and Wales. That is completely contrary to the Bill’s claim of adding transparency and providing no hiding place for dirty money. The amnesty will mean that large swathes of UK property are owned by overseas companies without any public knowledge of their true owners; people will simply not know who owns them.
I shall give some examples of Scottish property that is owned by anonymous offshore companies purchased before 8 December 2014 where people do not know who the true owners are: Strathfillan Forest, owned by Thar Enterprises in Jersey, registered at the Land Register in June 1999; Ardfin Estate, on the Isle of Jura, owned by Ardfin Lodge Ltd, again in Jersey, registered in November 2010; Glenogle Estate, owned by Glenogle Estate Ltd in the Isle of Man, registered in May 1999; most of Charlotte Square in Edinburgh, owned by Fordell Estates Ltd in the British Virgin Islands, registered in the Land Registry in 2010; Glenborrodale deer forest, owned by Luna Ltd in the Bahamas, registered at the Land Register in July 2000; and the Pitmain Estate, owned by Ranita Management SA in Panama. Even if these properties are acquired with clean money, people have a right to know who their neighbours are and who owns a large part of their locality. Are these people actually socially responsible? The Government are legally creating an amnesty, and that is really unacceptable.
This opacity is not just an issue in Scotland: it is an issue for the whole of the UK. Close to 250,000 residential properties in the UK are registered to individuals based overseas. UK property worth more than £170 billion is estimated to be held overseas, much of it anonymously. Last October, the Pandora papers leak revealed that Heads of Government, oligarchs, business tycoons, ruling families and Middle-Eastern monarchs were among the anonymous owners of at least £4 billion of property, held through offshore shell companies. When did they acquire that? We do not quite know: it might well have been before the dates specified in the Bill.
Lord Coaker (Lab)
My Lords, it is a pleasure to follow my noble friend Lord Sikka, who again comes forward with a number of amendments that are common sense and seek to shine a light on what is actually going on, and would deliver the transparency that so many of us seek in the Bill. We come to the transition period and the retrospective application, which is the subject of one of the most important groups, if not the most important group, of amendments this evening. It relates to the speed at which the register is implemented, as well as new measures that will apply during a proposed six-month transition period.
My noble friend Lady Chapman, along with the noble Lord, Lord Fox—we are grateful for his support—tabled Amendments 56, 61, 80 and 83. They seek to accelerate the implementation of the register of overseas entities, requiring initial registration within 28 days of commencement—again, seeking to avoid a situation where individuals or entities simply circumvent the law. This is not just a view held by us: the ICAEW, an accountants’ body, in the briefing that it sent your Lordships, also supported three months as a new transition period, with the ability to extend it for a further three months, were there a need to do so.
It is also worth noting that the sanction provisions—Part 1 of the Bill—will not commence on Royal Assent. Rather, they will require a commencement order laid by the Secretary of State. We understand that various steps need to be taken before that order can be laid. Can the Minister indicate how many steps there might be and roughly how long that will take? Is the upcoming Prorogation of Parliament, for example, likely to delay the introduction of any of the enabling regulations? When the Government moved from 18 months to six months in the other place, that left many thinking that the register would be active before the year end. Could it not actually be longer, given the need to implement various IT changes, inform people of the new requirements and so on? The House requires some reassurance about the commencement: in other words, when do the six months actually start? It could be six months now before the six months start: that would be a year for the implementation period. That is of real concern to us all, given the concerns that there are about the six months; so while we welcome the measures outlined in government Amendments 86 and 87, they do not prevent land being sold, gifted or transferred, and neither do they further reduce the current six-month implementation window. As many noble Lords said at Second Reading, a register of overseas entities has been promised for a number of years, and we certainly do not want any further delay, but there are serious questions to be asked.
Along with the noble Baroness, Lady Kramer, we also tabled Amendment 92. This is an evolution of the David Davis amendment considered in the other place. We accept that one very high-profile person of interest was Roman Abramovich. He is now subject to sanctions, and he plans to leave Chelsea under whatever arrangements he manages to make—or not, given the sanctions on him. However, one of the concerns around his case was that the Home Office was actually studying his affairs, but had no powers to take interim action while that assessment was being carried out. Is there therefore not a great deal of merit in our amendment, which seeks to freeze assets on an interim basis where there is good reason for doing so? In other words, if we are looking to sanctioning somebody, surely we would want to freeze their assets to prevent them from getting rid of them before a full order is put in place. At the moment, as I understand it, that cannot happen. I am not sure that under the Bill it would able to take place either, without this amendment. The Government might wish to look at the interim freezing of assets.
It might be, for example, that a person of interest hails from Belarus, which continues to enable the actions of Russia’s armed forces. What can be done about that? Does the legislation cover people in that situation as well? Again, we pose these questions to be helpful to the Government and raise serious concerns. We want the initiatives to succeed, but it is only with scrutiny—and the Government reacting and responding to the scrutiny, and acting on the various amendments that noble Lords have put forward from across this House—that we can have confidence in them. There might be only a few bad individuals among the applicants to the new register but the truth is, as my noble friend Lord Sikka and others have said, that we simply will not know what the case is unless there is maximum transparency. That transparency cannot come quickly enough.
Baroness Kramer (LD)
My Lords, my colleagues are doing all the heavy lifting from these Benches, and I am incredibly grateful to them. I have signed Amendment 92 in the name of the noble Lord, Lord Coaker, which I think found itself in drifting into the wrong group: it is actually part of group 3. One of the reasons why I signed it is this frustration, which I know the Government share, that, before a sanction is actually put in place, the individual who is likely to be sanctioned has, in a sense, plenty of warning signs and can use that opportunity to move various resources to a safe haven.
Much of the conversation around this Bill has been on fixed assets that are difficult to liquidate—property or complex companies—and I can understand why they might be less concerned about people knowing they are about to be sanctioned having the opportunity to move those. However, those same individuals tend to have very large investments in far more easily transportable assets—cash equivalents. I know that the Government are going to be looking at cryptocurrencies, which I have been very concerned about, when they get to the second phase of this Bill. It would, however, also be wrong to ignore such assets as jewellery and art. That is not just a tale from an Agatha Christie novel. I was a banker for many years in the mid-west, and most of my clients were exemplary people, but we certainly had one scoundrel who made the slight mistake of trying to impress a very charming young woman with an English accent and, as a consequence and with the aid of specialists, I was able to seize something worth close to half a billion dollars in artwork and jewellery against an attempt to defraud the bank. I ask therefore that the Minister think about these liquid assets, which play a part of the picture, but have been very little part of the discussion.
Baroness Jones of Moulsecoomb (GP)
I think that is a story for the noble Baroness’s memoirs, and I look forward to reading it.
There are lots of good amendments in this group but I want to speak to Amendments 56, 57, 61 and 62 about the implementation period. For me, the six-month implementation period makes absolutely no sense. We are trying to rush this through—we here are going to sit until I do not know what time tonight or tomorrow morning to make this emergency legislation happen, but we are still giving people six months to do this. The Government are taking so long that activists are going into oligarchs’ mansions and seizing them in London and Paris to house refugees, if we ever get any refugees here. I cannot blame this Government for the Paris seizure, but it suggests that people are getting very tired of the fact that they are being so slow about this. Why would anyone need six months? If they have been honest about paying their taxes, declaring profits and detailing the origin of their money, why do they need six months? Surely, any decent accountant—I am sure that there are several in your Lordships’ House—could sort this out within 14 days or, at the worst, 28 days. I think there is no reason for the Government not to support one of these two pairs of amendments that shorten the implementation period.
Lord Pannick (CB)
My Lords, I shall speak about Amendment 92 in the names of the noble Lord, Lord Coaker, and the noble Baroness, Lady Kramer, which would introduce a new clause headed:
“Asset freezing in respect of individuals considered for sanctions”.
Before I address that amendment, I need to give a fuller description of my interests—or, more accurately, my non-interests—than I would normally give. The reason for that is because in the House of Commons last week during the Second Reading debate on this Bill, Mr Matt Hancock complained that the 2018 Act contained amendments that
“came from those who are acting for oligarchs and then legislating for loopholes.”—[Official Report, Commons, 7/3/22; col. 31.]
The Home Secretary responded that she “wholeheartedly” agreed with Mr Hancock.
The position is this: with the noble and learned Lord, Lord Judge, who I see is in his place, I tabled amendments to what became the 2018 Act. They were designed to ensure a fair procedure and compliance with the rule of law. On Report, on 15 January 2018, the Government brought forward at column 442 amendments of their own on these subjects which were supported by me and, much more importantly, by the Labour and Liberal Democrat Front Benches. The House of Commons was content with the provisions approved by your Lordships’ House.
It is correct that in 2017 and 2018 I did not mention that I have advised and represented one client on sanctions matters in the last 10 years. I mention it today for the avoidance of any doubt. It was President Putin’s close associate Arkady Rotenberg. I represented him in 2014 and 2015 in the Court of Appeal on a sanctions issue in family law proceedings. I also advised him in relation to his claim in the General Court of the EU in mid-2015 challenging the sanctions against him, although I did not represent him at the hearing of his case in Luxembourg in 2016.
Of course, I did not put forward amendments to the sanctions Bill in late 2017 and early 2018 to legislate for loopholes. I put forward amendments with the noble and learned Lord, Lord Judge, as I have done on so many other Bills, because I am concerned about the width of ministerial powers and the need for fair procedures.
Lord Fox (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Pannick. I am glad that he had the opportunity to say what he had to say; I was surprised that he did not speak on Second Reading, for that very reason, so I am glad he has now had a chance—
Lord Pannick (CB)
I am very grateful to the noble Lord. I had an unavoidable other professional commitment, and the Second Reading took place at very short notice.
Lord Fox (LD)
It did indeed, and I am glad that the noble Lord has had the opportunity to speak.
Once again, we have a huge number of varied amendments lumped into the same group, which I think is a side-effect of the process we are travelling through. I am going to focus on two themes. I am not going to interpose myself between lawyers on the subject of Amendment 92, but I look forward to the Minister’s response to the comments of the noble Lord, Lord Coaker, and my noble friend Lady Kramer.
I will turn to Amendments 56, 61, 80 and 83 in the name of the noble Baroness, Lady Chapman, and signed by myself. I will be brief because I do not think we have to speak for very long on this. The noble Lord, Lord Coaker, has been eloquent in this vein already in the unfortunate absence of the noble Baroness, Lady Chapman.
During Second Reading we heard a chorus of disapproval on the six-month transition period, and there is a good reason for that. The noble Lord, Lord Coaker, was clear on those reasons, as were other speakers, including the noble Baroness, Lady Jones, and the noble Lord, Lord Sikka. We have to focus on what the Government are seeking to achieve and how they are going to achieve it. While that number is very important, the second number, introduced by the noble Lord, Lord Coaker, may be even more important, and it is the one covered by Amendment 97 in my name. It seeks to bring commencement forward to the First Reading of this Bill in the Commons. When I tabled that amendment, I was thinking of the National Security and Investment Act, which did just that.
In one of the meetings that the Minister kindly invited me to, he set out a number of reasons why that commencement date is, in Government’s view, not popular. The longer the Minister’s explanations were, the more alarmed I became, because it is clear now that the commencement date is subject to the pace of the slowest moving IT project. That is a matter of great concern, and certainly should be to your Lordships’ House.
In looking at the six-month transition period, we cannot isolate it from the commencement period, as the noble Lord, Lord Coaker, wisely stated. What the Minister has to think about and convince your Lordships of is how these two times work together. Can they be concurrent? Indeed, can commencement start without the whole system being in place? In other words, can there be some flexibility in how parts of the Bill come in? That would be controlled through statutory instruments, which the Government have control over.
Commencement is one thing, statutory instruments are another and the transition period is a third. They all add up to either a long time or a medium amount of time. The Minister needs to explain the formula the Government have in mind, because at the moment it seems to be a blank number. We do not really know when the terms of this Bill will be in place.
Lord Callanan (Con)
I am mindful that several noble Lords, including the noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Fox and Lord Sikka, have tabled a number of amendments in this group. I will start with Amendment 34 in the name of the noble Lord, Lord Foulkes, who I see is not in his place. I will speak to it alongside Amendments 58 and 67 tabled by the noble Lord, Lord Sikka, as they cover the same subject of retrospectivity and the subject the noble Baroness, Lady Jones, raised earlier.
These amendments seek to extend the scope of the definition of overseas entities registered as the proprietor of a relevant interest in land by removing the registration dates currently stated in the Bill. This has obviously been an area of interest in both Houses. The Government, of course, agree that the register should be as comprehensive as possible. However, there is no benefit to be gained from removing the dates as suggested, as I explained to the noble Baroness, Lady Jones, earlier. Doing so would instead create legal uncertainty. Due to the way information was collected prior to those dates, the land registries would have no way of reliably and consistently identifying properties owned by overseas entities and those that are not. It was not compulsory in England and Wales, for example, to register the jurisdiction of ownership before 1 January 1999. As such, the Land Registry would have this information only where the overseas entity had voluntarily supplied the information itself.
The amendment would result in inconsistent application, as the information needed to enter restrictions on disposition on to relevant titles is not readily available before these dates. They were not just dreamt up arbitrarily; these dates are put in for good reason. The result of removing the reference to the registration dates would be that only those entities that could be identified as being overseas entities could be brought properly into scope. Others that could not be so identified would not be.
This situation would also introduce significant uncertainty for buyers. There would be no way of providing absolute legal certainty as to whether an entity should or should not be in scope for those properties registered before 1999 in England and Wales, and before 2014 in Scotland. Third parties who were in the process of or considering purchasing a piece of land in the UK registered before those dates could not be sure whether they were engaging with an overseas entity that was in scope of the Bill, and which could become non-compliant at any time. The existing clauses are therefore essential for the register to be effective and operable, and to provide certainty as to which overseas entities are actually in scope of the requirement to register once the register goes live.
Finally, I remind the House that the agents who support property transactions are, as we have said earlier, all covered by the provisions of the anti-money laundering regulations. If there are properties with titles held by overseas entities going back further in time, when those entities next come to sell or lease those properties, the agents involved will be obliged to conduct appropriate checks for money laundering.
I turn now to Amendments 56, 57, 61, 62, 80 and 83 on the transition period. I thank the noble Baroness, Lady Chapman, and the noble Lords, Lord Fox and Lord Sikka, for their amendments to shorten the transition period as proposed. Of course, as the noble Lord, Lord Fox, has just said, I am aware that speed of implementation of the register and of the transition period has been the focus of much debate in both Houses so far. The Government have already reduced the transition period from the initially proposed 18 months to six months.
Lord Faulks (Non-Afl)
I am very grateful to the noble Lord for giving way. He talks, understandably, about a transition period and the need for everybody to adjust to the new provisions. However, while Ukraine may have come as a surprise, the existence, or likely existence, of this register cannot fall into that category. I am sure the noble Lord would agree with me that anybody who had owned property would have had years to prepare themselves since it was first mentioned in 2016. It was mentioned in the Criminal Finances Act and again in the Sanctions and Anti-Money Laundering Act. Why is there so much need for further transition, when anybody would have been aware of these provisions?
Lord Callanan (Con)
The noble Lord will know from his time in Government that the law officers provide confidential legal advice to Ministers. I can only say to him that I am personally satisfied that this six-month period is appropriate. We are taking a severe step with this legislation; we are retrospectively interfering with property rights. Whether the legislation has been flagged in advance—I think David Cameron first promised it in 2015—does not, as I understand it, alter the legal case that somebody who wished to purchase expensive legal help to challenge the legislation would be able to do so under the Human Rights Act. I can do no more than assure the noble Lord that the officials and I are acting under the legal advice that we have received about the appropriate period. I can assure him that I wish to bring this in as quickly as I can. He will be aware that the Government originally proposed a period of 18 months. Following fairly significant political pressure, we have taken further advice and have managed to reduce it to six months. I am seriously concerned that, if we reduced it further, we could be subject to legal challenge. I am happy to speak to him outside the House.
Lord Fox (LD)
My Lords, I assume that the noble Lord, Lord Faulks, has had the answer he required. To come back to implementation and commencement, it is not clear what the trigger for commencement would be. Can the Minister be clear on what the trigger for commencement will be and, having stated that, can he perhaps undertake to maintain a dialogue with your Lordships’ House on how reaching that trigger is getting along and when we might expect the commencement of this Bill?
Lord Callanan (Con)
I totally understand the point the noble Lord is making. I cannot give him a precise date; all I can say is that I am keen to commence this legislation as quickly as possible, but there are number of steps that we need to take. We need to publish and implement a number of statutory instruments on the back of this. Companies House needs to put the systems in place; it has already been given the funding for that. The computer systems need to be set up and the register needs to be activated. I am very happy to maintain a dialogue and keep the House informed, but the ultimate answer to the question of when the legislation will be commenced is: as soon as we possibly can.
Lord Fox (LD)
Given that your Lordships’ House has demonstrated that it can process statutory instruments at an insatiable rate, my point that the rate-determining step is an IT system in Companies House is entirely correct. Would the Minister confirm that?
Lord Callanan (Con)
It is a number of different things. There are administrative procedures to be put in place; the IT system is of course important—I am hesitant to give assurances on when a government IT system might operate. It is not a hugely complicated system, but it needs to be done and to be put in place. Of course, we also need to go on to the next step, namely the economic crime Bill which will follow this one and will give Companies House the right to query the information that has been provided, as I outlined to noble Lords earlier. However, I am very happy to keep the House informed as to commencement dates. I am sure a lot of people will be writing to me about it and will be using the devices of the House to table Questions to ensure that my feet are held to the fire on this one.
Lord Faulks (Non-Afl)
I am sorry, but I had not quite got an answer. I absolutely appreciate the Minister’s sincerity in wanting to get this register ready. My point was that the transition would come as no surprise. His answer—as I understood it—was that the Government are concerned about possible legal action, which is not quite the same thing, because I think he is talking about a possible challenge under Article 1 of Protocol 1 to the European convention. I respectfully suggest to him that lawyers are being extremely cautious about this because, in the circumstances, it would be quite a brave court that would decide that the time allowed for transition was so short that they would be allowed to retain possessions.
Lord Callanan (Con)
I thank the noble Lord for his legal advice; I should not let my prejudices against lawyers get in the way here, but no doubt there are others who one might want to employ who might give a different opinion. All I can say is that we are acting under the advice that we have received. I am told that while people may have had an idea in advance that we would be introduce such legislation, the fact of Parliament actually passing it will, I suspect, be the legal test for when the register starts and when the requirements come into force—whether or not it had been flagged up in advance. However, that would be my opinion as a mere engineer, not a lawyer; I am sure that other opinions are no doubt available.
I turn now to Amendment 92—
Lord Sentamu (CB)
My Lords, I apologise that I was not here for Second Reading. I went down with a very bad cold and I wrote to the Convener’s office to say that I could not be here, so I apologise.
Can the Minister explain why the Government had gone for 18 months instead of six? Was the legal advice for 18 months that someone could challenge, so a longer transitional period was needed? Yes, there could be cases that come up, but if the intention is quite obvious and very clear why the decision is being taken, could he tell us why—no matter the number of days that you give for the transition—a very rich oligarch could not still bring a case regardless? I cannot understand why we have gone from 18 to six months, and now the Government are saying to stick at six because there will be a legal case. As a legislator, I just do not understand that.
Lord Callanan (Con)
I am happy to explain it to the noble and right reverend Lord. This is a severe piece of legislation retrospectively interfering with someone’s property rights going back—in the case of England and Wales—to 1999. Somebody could not have known when they entered into that transaction that we would wish to retrospectively legislate for that. There is a section in the Human Rights Act—I think it is the section quoted by my noble friend—about enjoyment of property and we are interfering with that. Bearing in mind that these are overseas entities for which contact details are sometimes not available, my advice is that we need a reasonable period for the entity concerned to become aware of their legal obligations. The rich oligarch mentioned by the noble and right reverend Lord may wish to bring a challenge against us on the basis that we had not allowed a reasonable period. What a “reasonable period” is then becomes a matter of legal definition and argument, for which there are obviously a variety of views. That is probably the best summation I can give of the case. I hope that satisfies the noble and right reverend Lord.
Moving on to the famous Amendment 92, I thank the noble Lord, Lord Coaker, for his innovative suggestion for a wide-ranging power for the Secretary of State aimed at preventing asset flight before the formal imposition of sanctions. I hope the measures we have added in the other House go a significant way towards dealing with the kinds of situations the noble Lord may have in mind. The sanctions measures in the Bill are designed to ensure that we are able to respond even more effectively to world events using those sanctions. While, of course, we are living in unprecedented times, I am concerned that his proposals would give huge amounts of power not just to the Secretary of State in relation to Putin’s regime but to future Secretaries of State with regard to people who are not yet the subject of sanctions regimes. Much as I hate to admit it, I think I agree with the noble Lord, Lord Pannick—for a change—on this one. We need to tread carefully on such matters. Indeed, this amendment would provide an open-ended power to freeze assets for an unspecified period prior to sanctions being imposed and includes custodial penalties for those who breach it.
I think we have led the world in sanctioning Putin and his cronies. In some areas we have gone further than the EU; for example, we have banned all 3 million-plus Russian companies from getting loans in the UK or from listing. The Government strongly support measures to ensure that sanctions are effective and will continue to keep under consideration all steps necessary to achieve that. In light of what I have said, I hope the noble Lord will not press the amendment, but this is on the understanding and with the commitment that the Government will continue to keep under review how we ensure that we have all the tools at our disposal to ensure that sanctions are as effective as possible.
In conclusion, I am aware of the strength of feeling in the House on this issue of the transition period. It has been made clear to me in meetings, in particular with the noble Lord, Lord Coaker, and the Opposition Front Bench, and the noble Lord, Lord Fox, and the Liberal Democrat Front Bench. I have listened carefully to the points made in this debate, particularly the powerful remarks made by the noble Lord, Lord Coaker, and I am grateful for the constructive approach that the Opposition in particular have adopted on this matter. I will, of course, continue discussions with the noble Lord, and I am sure we will continue to talk these matters through before we commence Report on the Bill. I beg leave to withdraw the amendment.
Baroness Kramer
“(1A) The Secretary of State must, within 6 months of this section coming into force, by regulations, establish within the office of the registrar a whistleblower office to receive whistleblowing reports on the accuracy of information provided under sections 12 and 13 and to provide confidentiality and protection from retaliation for any such whistleblowers.”Member’s explanatory statement
This amendment would require the Secretary of State to establish a whistleblower office within the office of the registrar to receive whistleblowing reports on the accuracy of information provided under sections 12 and 13 and to provide confidentiality and protection from retaliation.
Baroness Kramer (LD)
My Lords, I will try to be brief on this issue. Amendments 40 and 41 both refer to whistleblowers and protection for them. Whistleblowers will be absolutely crucial if the register proposed in this legislation is to be accurate, but they will also be crucial for unexplained wealth orders and sanctions to be fully effective. Where those whistleblowers expose kleptocrats, hidden assets, money-washing schemes and individuals linked with owning, hiding and laundering, they will be taking really serious risks, both for themselves and for their families.
Confidential disclosure to a regulator or an enforcement agency only sometimes provides anonymity. It may be obvious who the whistleblower is because the information is held by so few people, or, as we have seen in many instances, it may be that the less scrupulous—whom we are going after—hire investigators in order to expose the identity of whoever spoke out.
At the very least, we need to be sure that there are genuine safe disclosure channels, and they need to be communicated in a very powerful way to everyone who might have information. The risk is not just physical harm by criminals, although that comes to mind when we think of the particular pool of individuals that this legislation is aimed at; it is also retaliation by enablers—the banks, the legal firms, the accounting firms and others. I fear that they have an unfortunate track record of quite devastating retaliation. Some obviously are very much better than others, but I anticipate that the kinds of entities that are sufficiently lax internally that they are willing to provide support to those engaged in money laundering and whose money has come through kleptocracy will be among the sternest in using retaliation against a whistleblower.
Individuals who lose their job or their contract are informally but effectively blacklisted—that probably is the least of their problems. Those who lose their jobs turn to employment tribunals. I know that the Government often pray in aid employment tribunals, but I suspect that many people are not aware of how costly an employment tribunal is for the individual seeking to make their case: we are talking about thousands of pounds and it can easily reach £100,000 or more. The entity they are up against can obviously afford the best lawyers and the most significant QCs. It is also very possible for an employer to string out an employment tribunal through various legal tools. Three years is not at all unusual, and seven years is not unknown, even for a successful whistleblower. During that time, the whistleblower has no income and must pay the high legal costs, with all the consequences for their family and their friends, from whom they borrow. This inequality of arms and the general stress of the whole process force many whistleblowers to settle and to sign agreements that prohibit disclosure.
The Government will say, “They can always make disclosures to regulators and enforcement agencies”, but it is certainly true that many whistleblowers become so afraid after they have been through the grinder of this process that they do not even dare to do that. This is part and parcel of how legal firms and others try to shut down anyone exposing wrongdoing by the powerful. We discussed SLAPPs at Second Reading, when my noble friend Lord Thomas went through some of the kinds of strategic lawsuits against public participation that have been levied against authors and journalists who have exposed kleptocrats. Imagine that same energy and attention turned on someone who is seen as an insider or an employee—it would be an even more bitter and devastating reaction.
The United States knows the value of whistleblowers in a way that is, frankly, ignored in this country. It is why we have a history of so many fewer prosecutions and convictions. Indeed, most financial scandals are exposed first by the Americans. You can almost go through a list—if there is any American connection, you can pretty much guarantee that it was a US agency that first exposed the problem. US prosecutors, and I have talked to many, will tell you that at least half of the convictions for financial crime in the US depend fundamentally on whistleblower evidence. Whistleblower evidence also assists in many more cases. In this country, if you ask the regulators and enforcement agencies, they will say that whistleblowers make only minor contributions. That may explain why prosecution in this country is, frankly, quite rare.
Last year, the United States, in anticipation of the issues we are facing now, passed the Kleptocracy Asset Recovery Rewards Act with extraterritorial reach, both as an incentive to whistleblowers and to compensate them for what are recognised to be career-ending and, in these particular instances, potentially life-threatening disclosures. There is a very interesting preamble to the legislation that makes clear the depth of concern that Congress had. At this moment, I would have to say to any potential whistleblower in a case where there is the slightest US connection, “Go to the Americans, your information will be taken seriously, you and your family will be protected and you will not end up ruined”. I cannot say the same thing to any potential whistleblower here in the UK and I think that has to change, and quickly.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise very briefly to make my first contribution in Committee on these two very important amendments. Both were very comprehensively introduced by the noble Baroness, Lady Kramer.
As a former journalist, I reflect on how protecting your sources is something that is drummed into you from a very early stage in your career. However, one thing I have observed over 20-plus years as a journalist is how much more complex this has become. Having been an editor at the Guardian Media Group, I know what difficulties there are in trying to protect sources these days. That is on the technical side of things. But, as the noble Baroness, Lady Kramer, said, there is also the issue of how torrid a time some people have had even when whistleblowing about what you might describe as ordinary and mainstream companies. We have seen that with people who have exposed safety and financial issues. With some of the people we are looking to target here, it is crucial that there is the security of knowing that, if information comes out and others seek to prosecute, uncover and expose them, there will be a group looking after the whistleblower. The noble Baroness has made a very important point.
Lord Agnew of Oulton (Con)
I support the amendment of the noble Baroness, Lady Kramer. I accept that it is unlikely to go into this Bill, but I very much hope that it will go into mark 2.
I do not share the somewhat Panglossian view of my noble friend the Minister that this whole crime issue is a tiny issue. There is a wall of bad money out there trying to get in, and we have been far too complacent. The Transparency International report of 2018 looked at the BVI and found over 1,100 companies involved in 200 major frauds to the value of tens of billions of pounds. This was just one territory.
Whistleblowers are a vital source of information and intelligence. The noble Baroness, Lady Kramer, is right in saying that we do not recognise them nearly enough in this country. I will not go on further, save to ask the Minister replying that she will take back this issue and ensure that it is plumbed into the next Bill.
Lord Cromwell (CB)
I rise briefly, in part to support this whistleblower amendment. I have asked questions on this in the House before. They are very poorly treated—this is just a fact. I agree with the noble Baroness, Lady Kramer, that we need to do better, but I also agree with her that it probably does not fit into this Bill. The noble Baroness has been a tireless advocate for an office for the whistleblower, and such a facility needs to be brought forward rather than permanently left to wither on the vine, as has been the case.
When I asked a question about whistleblowers before, a Member of the House, who was sitting behind me and is no longer with us, said, “Don’t you mean snitches?”. That is exactly the kind of culture we face. I hope that the Government, broader than this Bill, will look seriously at an office for whistleblowers.
Baroness Smith of Basildon (Lab)
My Lords, in some ways, the amendments from the noble Baroness, Lady Kramer—she has done the House a service in tabling them—go to the heart of some of the issues that we have with the Bill as a House. It is that tension between recognising that the Bill is inadequate in many ways and recognising its necessity and why we are passing it today.
I am grateful to the noble Baroness, Lady Kramer, because her speech tonight was very powerful in setting out the reasons why such measures are essential. From what she was saying and in listening to the Minister earlier, and given the impact that these measures could have on the implementation of the measures in the Bill, it seems to me important that the Government look at this as a matter of urgency. There are huge merits to her arguments and it would be useful to know what the Minister can say on behalf of the Government.
It has been clear over a number of years that there is a multitude of undesirable activities that have come to light only because of the bravery of whistleblowers. The process started by this Bill—to be continued, as we have heard, by the second economic crime Bill—will, we hope, result in a lot more information coming forward. If that is the case, we should recognise that those who bring forward information of wrongdoing are performing a public service, and we rely on them to do that. No one should be in the position that they fear giving evidence because of reprisals or because they think no one is going to take them seriously and nothing will be done about it. Both are equally bad.
We accept not only that the registrar’s office should have a mechanism for receiving and processing the information but, on the point the noble Baroness, Lady Kramer, raised, the importance of doing everything possible to protect the individuals who have raised concerns. Without that protection, we are not going to get the people we need coming forward or they will do so at huge detriment to themselves. I hope the Minister will be able to tell us what the Government are doing on this. We have heard previously that this is something they are looking at and that something will come forward, but we need something a little more concrete, given the importance of this to this Bill.
The noble Lord the Minister spoke earlier about the measures that will be in the second economic crime Bill. I think we really needed a commitment not only that something like this will be considered for that Bill—we are happy to have discussions about how that could be done—but that it will come forward not just in the next Session but early in the next Session. To delay anything undermines the very purpose of being here tonight, to see through legislation which is now an emergency but need not have been an emergency. As the noble Lord, Lord Faulks, mentioned earlier, many of these things have been known about and talked about, but they have not come to fruition. Tonight there is an opportunity to say that we recognise the inadequacy of the Bill but also the necessity of it. I hope we will hear a very positive response from the Minister that there will be something to address this in the next Bill and that this will come very early in the next Session.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Baroness, Lady Kramer, for this amendment. I acknowledge that she has a very impressive record of championing the whistleblowers’ cause. Indeed, as a number of noble Lords have said, this is clearly a common cause in the House.
Amendment 40 seeks to establish a whistleblowers’ office within the office of the registrar to receive whistleblowing reports on the accuracy of information and provide confidentiality and protection from retaliation. This amendment would do so by conferring an obligation on the Secretary of State to create the office within six months of Part 1 of this Bill coming into force.
This amendment would make changes to Clause 14, a supplementary clause that relates specifically to Clauses 12 and 13. Clause 12 sets out that an overseas entity must take reasonable steps to identify registerable beneficial owners and obtain the required information. The steps that must be taken in this regard include giving an information notice to any person that it knows or has reasonable cause to believe is a registrable beneficial owner. It also gives the person who is thought by the entity to be a beneficial owner an opportunity to correct inaccurate information where necessary.
Clause 13 builds on what is presented in Clause 12 by providing an overseas entity with additional powers to obtain information in order to identify beneficial owners if necessary. It provides that an information notice can be presented to a person who is thought to be able to assist with providing beneficial ownership information. This clause allows for entities to take extra steps in ensuring they have taken all reasonable steps to identify the beneficial owners. The Government believe that the provisions in Clauses 12 and 13 will help in making sure that the correct beneficial owners are identified and registered.
Companies House already offers an anonymous “report it now” function for anyone to raise concerns about the accuracy of information it holds. We will ensure that this functionality is extended to the new register of overseas entities. It is also worth noting that Companies House will be provided with expanded and stronger powers to challenge and pursue suspicious filings in the forthcoming second part of the economic crime Bill, as set out in our recent White Paper. This will include a new power for the registrar to query information, including in light of concerns raised by third parties. Those concerns might be raised through the “report it now” function or through other mechanisms, including duties on the regulated sectors. We will take care to ensure that those third parties are suitably protected.
The noble Baroness, Lady Kramer, mentioned the American scheme. There are different opinions on the impact of providing financial incentives to whistleblowers, reflecting local legal, political and social norms. However, organisations representing UK whistleblowers, such as Protect, do not recommend the introduction of financial rewards or incentives. The FCA and the PRA undertook research considering an incentive scheme for whistleblowers and published their conclusions in July 2014. They concluded then that providing financial incentives to whistleblowers would not encourage whistleblowing or significantly increase the integrity and transparency of financial markets.
The noble Baroness, Lady Smith of Basildon, asked what the Government had done to improve the whistleblowing framework. This work is ongoing, but we have already increased the scope of those protected by our whistleblowing laws by extending protection to groups previously not included. This greater transparency around the work of prescribed persons aims to increase confidence among whistleblowers that their disclosures are taken seriously and to improve consistency across different bodies in the way they respond to disclosures.
Baroness Smith of Basildon (Lab)
I asked not what the Government had done but what they were going to do.
Baroness Bloomfield of Hinton Waldrist (Con)
Sorry; I misunderstood.
It is right and proper that the Government review the whistleblowing framework once we have had sufficient time to build the necessary evidence of the impact of the most recent reforms. We acknowledge that an effective whistleblowing framework is an important part of the UK’s ability to tackle corruption and all forms of economic crime and illicit finance. These acts are, by their nature, often covert. The Government are committed to ensuring that individuals are able to speak up about the behaviour of bad actors.
In recent years the Government have continued to improve the whistleblowing framework, and we will continue to do so in future. It is important that whistleblowing disclosures are dealt with properly and by the right body. This is why BEIS maintains and regularly updates the prescribed persons order. Officials work closely with other government departments, the devolved Administrations and regulators to ensure the list is up to date. I can assure noble Lords that this work is ongoing, and we will continue to improve the whistleblowing framework in the near future.
With that, I ask the noble Baroness to withdraw her amendment.
Baroness Kramer (LD)
Obviously, I am very disappointed with the answer and the ongoing complacency that undermines the legislation we are passing, but at this point in time I beg leave to withdraw the amendment.
Lord Eatwell
“(A1) All information delivered to the registrar for the purposes of sections 4(1)(c), 7(1)(d) and 9(1)(e) must be verified by the registrar.”Member’s explanatory statement
This amendment places a statutory responsibility on the Registrar to secure the verification of the relevant information in the register.
Lord Eatwell (Lab)
My Lords, I explained at Second Reading that lack of data verification at Companies House has been a fundamental factor in enabling—indeed, encouraging—the flow of dirty money to London. Lack of data verification has played a major part in securing London’s position as the money laundering capital of the world. As I argued last week:
“Companies House is a library in which any shameful book can be deposited”—[Official Report, 9/3/22; col. 1496.]
and accepted without fear of exposure or retribution. Indeed, just earlier this afternoon, the noble Lord, Lord Callanan, described Companies House procedures as “dumb”.
This afternoon, we have been debating amendments to the Bill that will define more accurately and more widely the sort of information that will, as a result of the Bill, be required to be offered to the registrar. However, nothing we have discussed so far will guarantee that the information is accurate. If it is not accurate, it is useless or indeed worse than useless.
Lord Faulks (Non-Afl)
My Lords, I entirely support what the noble Lord, Lord Eatwell, said. It is very much along the lines of the recommendations of the Joint Committee which I had the privilege of chairing. I quote just one paragraph:
“It is regrettable that, as currently conceived, the proposed Register of Overseas Entities will have insufficient verification checks to deter criminals who wish to submit false information. It therefore seriously risks failing in its central policy aim: to provide a reliable and transparent record of the beneficial ownership information of overseas entities investing in the UK property market.”
We discussed a number of the points that the noble Lord made so eloquently at Second Reading and today, including placing a greater burden on professionals to verify information. It is clearly fundamental; without verification, the Bill will not be as successful as it should be.
Baroness Kramer (LD)
My Lords, I will speak briefly on this issue, because I am very much of the opinion, as are many in the Committee, that a combination of both a public register—so that civil society groups, journalists, activists and people in different countries will have access to different kinds of information—and vigorous verification is the kind of safeguard we need if we are to end the history of the London laundromat and prevent London remaining a magnet for a great deal of dirty money that is floating around the globe.
Like many people, when I heard that there would be a register of beneficial owners of property that would have a verification component and that verification would be introduced at Companies House, I was elated. Then I actually read the language in the Bill and it seemed, as the noble Lord, Lord Faulks, said, so light touch that there might be something vigorous, but on an exceptional basis and not as a matter of routine. As there is little in the Bill to strengthen the responsibilities of the enablers, I am worried that we will end up with the worst of all worlds—a headline that makes it looks as though we are taking significant and serious action, but implementation that completely misses the mark.
I know the Minister has sometimes said that we have plenty of legislation to deal with enablers, and which has been strengthened somewhat, but if we had adequate legislation to deal with enablers we would not have a single instance of money laundering in this country, because nobody bringing in dirty money is able to buy a single piece of property, take control of a company or engage in any other activities without using an enabler. You need the lawyers, accountants and property developers. We clearly cannot choke off that particular avenue to sustain the London laundromat. All these things come together. I hope the Minister will look again at verification. It will partly be a matter of resources—those absolutely matter—but it also has to be standard practice that a very high level of verification is embedded to deal with every item in the register.
Lord Pannick (CB)
My Lords, I share the concerns expressed about the need for rigorous verification. I note that Clause 16 confers a broad power on the Secretary of State to make regulations in this field. Is the Minister able to assure the Committee that those regulations will impose a rigorous form of verification and requirements along the lines of those that have been proposed?
Lord Cromwell (CB)
Before the Minister tries to answer that, we need to recognise delivering what the noble Lord, Lord Eatwell, wants would be absolutely transformative to Companies House. There is no tinkering at the edges here; this would be a massive transformational change and, unless we get that, this amendment will not deliver what is being asked of it.
Lord Vaux of Harrowden (CB)
I will quickly add to the comments from the noble Lord, Lord Pannick. Clause 16 sets out the regulations must
“make provision … about the information that must be verified … about the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes of sections”
et cetera. Perhaps the Minister could enlighten us as to what he has in mind there.
Lord Coaker (Lab)
My Lords, I am grateful to my noble friend Lord Eatwell for moving Amendment 42. As we all know, he has a huge amount of experience in this field, having overseen many of these matters in another jurisdiction. He has long pressed the Government to introduce a register of this kind, but Amendment 42 calls for proper data verification. As we have heard from a number of noble Lords—the noble Lords, Lord Vaux and Lord Cromwell, the noble Baroness, Lady Kramer, and others—it is essential to the credibility of this Bill to ensure that any data is verified and accurate, as my noble friend Lord Eatwell put it.
The Government moved a little on this topic when the Bill was in the House of Commons, passing what was then Amendment 49, as we heard from other noble Lords, requiring the Secretary of State to lay regulations outlining the verification process before the register goes live. We welcome that move as it provides greater certainty, but as we have already heard, it prompts a number of supplementary questions and, in our view, does not go far enough. That is what Amendment 42, which we support, seeks to address.
When will we see the regulations? Will the process be based on previous consultations or require a separate engagement exercise? What if they are brought forward and the envisaged process is deemed inadequate? What if we end up getting the Bill before the SI has been laid? As with the earlier group on the transition period, we need greater clarity on process and timescales. Surely, accurate, verified data as required by my noble friend Lord Eatwell’s Amendment 42 is essential; without it, the Bill simply will not succeed.
Lord Callanan (Con)
I first thank the noble Lord, Lord Eatwell, for tabling Amendment 42 and for his thoughtful contribution at Second Reading on the same subject. He is, of course, absolutely right: I agree wholeheartedly that ensuring the public can be confident that the data on the register is reliable is of the utmost importance. That is why, as has been referred to, the Bill already provides for the making of regulations to create a robust and effective verification mechanism.
Clause 16 sets out that:
“The Secretary of State must by regulations make provision requiring the verification of information”,
which must be in place before an overseas entity can undertake certain actions. These actions include applying for registration to, or removal from, the register. Clause 16 sets out that these regulations can include provisions about
“the information that must be verified … the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes”
of registration, updating of information and removal from the register.
This amendment seeks to add a statutory responsibility on the registrar to ensure the verification of any information provided to the registrar in accordance with the regulations made under Clause 16. The amendment would place responsibility for ensuring that information is verified on to the registrar, which means that the registrar would have to be satisfied that the information provided at the application stage is verified. We believe that such an addition would be nugatory to the already robust verification process that will be set out in regulations attached to this Bill once it has passed through Parliament.
The regulations that will be made under Clause 16 include the ability to specify the types of statements and evidence that the registrar can require in order to be satisfied that the information submitted to the register is appropriately verified. We expect that UK professionals regulated under the money laundering regulations will have a role to play in the verification process. We are, of course, aware of concerns raised in this House about enablers who might seek to undermine our systems. The verification process that will be set out in regulations will ensure that, whatever process is used, it cannot be undermined by enablers of unlawful activity. To support this, as was referred to by the noble Lord, Lord Coaker, we have also put forward an amendment that would ensure that, where anyone submits information that is false or misleading without reasonable excuse, they can be held to account for that.
I would also direct noble Lords’ attention to the amendment tabled by the Government in the other place, which committed to bringing regulations made under Clause 16 into force before any applications for registration may be made under Section 4(1). Therefore, creating a specific statutory requirement for the registrar to secure verification, as the amendment proposes, is in my opinion not necessary. The verification mechanism already contained in the Bill will ensure that those engaging with the regime have confidence in the information held on the register. I therefore hope that the noble Lord will feel able to withdraw his amendment.
Lord Eatwell (Lab)
My Lords, I always think that the government defence of “not necessary” is the weakest we ever hear in this House. My amendment calls for a clear statutory requirement for verification. Just think of the contrary, which the noble Lord is supporting: that there will not be final statutory verification, and that information will be provided by professionals, enablers. He says that we can ensure that this will not “undermine the process”. If he believes that, he will believe anything. How can he ensure that it will not undermine the process, unless there is a means of checking that it is not undermining the process?
We are dealing with very sophisticated crooks with the best legal advice that money can buy and the Minister is leaving the Bill naked, with the key protection lacking that is necessary to sustain confidence in financial markets in this country. This is a sad day for the probity of those markets. Having said that, regrettably, I beg leave to withdraw the amendment.
Member’s explanatory statement
This amendment removes the ability of the Secretary of State to exempt an individual from the requirements to register their overseas entities on the grounds of the economic wellbeing of the United Kingdom.
Lord Fox (LD)
My Lords, Amendment 43 is also signed by the noble Lord, Lord Coaker. During Second Reading, I spoke at length on this issue, so noble Lords will be pleased to know that that allows me to be brief in Committee. The amendment is clear, but I shall briefly explain its purpose. Frankly, it is one of the simpler amendments we have before us.
Clause 18 deals with exemptions. Subsection (1) gives the Secretary of State the power to write to a person to exempt them from this part of the Bill if said Secretary of State is satisfied that one of three conditions is fulfilled:
“(a) in the interests of national security … (c) for the purposes of preventing or detecting serious crime”—
I do not think any of your Lordships would find that an unacceptable condition—but
“(b) in the interests of the economic wellbeing of the United Kingdom”.
First, what does that mean, and secondly, why is it there?
The Minister heard not just my words but the compelling words of the right reverend Prelate the Bishop of Leeds, my noble friend Lady Kramer and others who explained—and I hope the Minister understood—why Clause 18(1)(b) is the wrong message to be sending, particularly at this time. I explained this issue to some members of the general public—people who do not actively engage in the sport of politics—and asked them what they thought. Their reply was, “Isn’t that the approach that got us into this trouble in the first place?” Quite. That is the message that the clause is sending.
This part of the Bill is designed to deliver transparent information that can be used by authorities, potential business partners and others to avoid trading with kleptocrats, thieves and money launderers. Hiding that information unnecessarily cannot be good for the economy. Why would a Secretary of State want to do that in these conditions? Amendment 43 removes that power from the Bill, and I beg to move.
Lord Callanan (Con)
My Lords, it might be helpful for the Committee, before it debates this amendment, if I set out that of course I am aware of the strength of feeling on this issue and am very grateful for the engagement with the noble Lords, Lord Coaker and Lord Fox, and others on it over the weekend and the past few days.
As I indicated earlier, we are keen to progress this vital legislation collaboratively and swiftly, and I again pay tribute to the Opposition for helping us to do that. Therefore, if I tell the House that the Government are prepared to accept Amendment 43 tabled by the noble Lords, Lord Fox and Lord Coaker, should they wish to re-table it on Report, perhaps that would enable a more speedy consideration of this group.
Lord Agnew of Oulton (Con)
My Lords, in view of that, I will not press my Amendment 44.
Lord Coaker (Lab)
It would be appropriate to thank the Minister for agreeing to accept the amendment in my name and that of the noble Lord, Lord Fox, so I put that on the record, and we will come back to it on Report.
Lord Fox (LD)
I said it would be swift, but I had not calculated that it would be quite this swift, so I thank the Minister for meeting us in this way and making this move; it is much appreciated. With that, I beg leave to withdraw Amendment 43. I will bring it back on Report.
Lord Callanan
“(5A) The Secretary of State must consult the Department of Finance in Northern Ireland before making regulations under subsection (4).”Member’s explanatory statement
This amendment requires the Secretary of State to consult a Northern Ireland department before making regulations under Clause 32(4).
Lord Callanan (Con)
My Lords, Amendments 54 and 84 require the Secretary of State to consult the devolved Administrations before making regulations on devolved land matters. It is appropriate when the Secretary of State is legislating on devolved matters in this space to consult the responsible devolved Ministers. This approach is supported by Ministers in the Northern Ireland Executive and in the Scottish Government.
The Bill seeks to make amendments to the Land Registration Act (Northern Ireland) 1970 to capture properties in Northern Ireland within the register of overseas entities by adding a new Schedule 8A. Clause 32 of the Bill allows the Secretary of State to amend by regulation the new Schedule 8A measures on Northern Ireland land provisions and the register of overseas entities.
It is, of course, convention that Westminster shall legislate only with the consent and support of devolved Ministers on devolved matters. The support of Northern Ireland Ministers has been secured for the provisions of the Bill but, should the measures be amended in the future, it is justified that the Secretary of State ought to consult with the Department of Finance before laying regulations. It is for this reason that Amendment 54 is being made. It will ensure that devolved Ministers continue to contribute on devolved matters.
The Bill also makes amendments to the Conveyancing (Scotland) Act 1924 and the Land Registration etc. (Scotland) Act 2012, including adding new Schedule 1A to the 2012 Act to include Scottish properties bought on or after 8 December 2014 within the scope of the register of overseas entities. Paragraph 13 of Schedule 4 to the Bill allows the Secretary of State to make further provisions for the purpose of requiring or encouraging an overseas entity owning land in Scotland to submit to the register of overseas entities.
As with Northern Ireland, Scotland has devolved competence for land provisions. I am pleased to say that the Bill has secured a legislative consent Motion from the Scottish Parliament, but this amendment would ensure that Scottish Ministers are consulted before regulations are laid, which will further impact those devolved matters. I beg to move.
Lord Hope of Craighead (CB)
My Lords, as someone who takes a close interest in devolution matters, I am delighted with these amendments. I have quite often moved amendments in similar terms and not been successful. It is a pleasure to see the Minister produce amendments in the very terms that I would have liked to have seen in the Bill. I very much welcome them both.
Lord Faulks (Non-Afl)
As a fellow member of the Constitution Committee, I endorse what the noble and learned Lord said. This is one of the points that we as a committee regularly make: it is one thing to have the Sewel convention in primary legislation; it is another to have it in subordinate legislation. We very much welcome this as a matter of practice.
Lord Fox (LD)
Never has the noble Lord, Lord Callanan, received such glowing praise, in my experience, and here am I to heap more of it on. These amendments are very welcome, as is the legislative consent from the Scottish Government. I have one point that I am sure the Minister will be able to confirm: I hope the Government will be able to continue the level of consultation the Minister could show through the regulation-making process and the statutory instruments.
Baroness Smith of Basildon (Lab)
I can add to the Minister’s embarrassment. We are pleased to see these amendments brought forward. I have two questions. I think I understand why it is different, but it might be helpful if the Minister could put on record why one amendment refers to the Department of Finance in relation to Northern Ireland yet in the other, for Scotland, it is Scottish Ministers. It seems slightly odd. Secondly, has formal engagement begun already and, if not, when will that start? Overwhelmingly, we thank the Minister and hope that this is a sign of things to come.
Lord Callanan (Con)
I should quit while I am ahead on this one. I am not sure this will continue with other Bills, but let us welcome it when it happens.
I thank noble Lords for their brief comments. I am happy to confirm to the noble Baroness, Lady Smith, that engagement has already started. I have spoken to Scottish Ministers. I think I spoke to Welsh Ministers, but if not some of my colleagues have. I definitely also spoke to Ministers from Northern Ireland. I will get back to her with the precise reasons why it is the Department of Finance. I suspect the problem is that we have not been able to get a formal consent Motion from the Northern Ireland Assembly because it is not sitting, but we do have written confirmation from the Ministers that if the Assembly had been sitting they would have recommended that a legislative consent Motion be granted. I suspect that is why the Department of Finance is mentioned, rather than the Northern Ireland Assembly.
After moving the amendment, I now ask that it be withdrawn so that I can retable it and the other amendments on Report.
Lord Clement-Jones
“Civil recovery: costs of proceedings
After section 316 of the Proceeds of Crime Act 2002 insert—“Civil recovery: costs of proceedings<strong>316A </strong> Costs orders(1) This section applies to proceedings brought by an enforcement authority under part 5 of the Proceeds of Crime Act 2002.(2) The court may not make an order that any costs of proceedings relating to a case to which this section applies (including appeal proceedings) are payable by an enforcement authority to a respondent or a specified responsible officer in respect of the involvement of the respondent or the officer in those proceedings, unless—(a) the authority acted unreasonably in making or opposing the application to which the proceedings relate, or in supporting or opposing the making of the order to which the proceedings relate, or(b) the authority acted dishonestly or improperly in the course of the proceedings.””
Lord Clement-Jones (LD)
This amendment would provide limits on costs orders in relation to all civil recovery proceedings brought by an enforcement authority under Part 5 of the Proceeds of Crime Act 2002, which enables law enforcement authorities to recover property obtained through unlawful conduct without the evidentiary difficulties of securing a criminal conviction. The effective exercise of these powers is essential if civil recovery is to fulfil its purpose of deterring criminals who are as concerned, if not more concerned, with losing their assets than they are with losing their liberty.
The current costs regime for civil recovery is fragmented, with different rules applicable in different courts. I am very well aware that on the other side of the aisle are some of the experts in this area. Civil Procedure Rules apply in the High Court, the Court of Appeal and county courts. Rule 44.2 of the CPR sets out the general principles in civil proceedings that costs follow the result—that is, the winner pays the loser’s costs, but the court retains discretion to make a different order and determine the amount of costs to be paid. The principles relevant to the exercise of judicial discretion to award costs in civil proceedings in the Crown Court and magistrates’ courts have evolved over time through case law.
In civil proceedings brought by public authorities in the Crown Court and magistrates’ courts, the approach to costs is reflected in the so-called Perinpanathan principle. This includes civil recovery proceedings brought under Part 5 of the Proceeds of Crime Act 2002. In the Perinpanathan case, the Court of Appeal held that, where a public authority is unsuccessful in bringing an application, the default position or starting point is that no order for costs is made. However, a successful private party may be awarded costs if the conduct of the public authority justifies it. As a result, enforcement authorities will rarely have to pay costs when pursuing civil recovery in the magistrates’ court, but are exposed to significant costs in High Court proceedings, where the general rule is that the unsuccessful party pays the legal costs of the successful party.
Clauses 47 and 48 reflect a recognition that significant and deterring costs have made enforcement authorities reluctant to utilise unexplained wealth orders in their current iteration. Only nine UWOs, relating to four cases, have been obtained by the National Crime Agency since this investigative tool was introduced in January 2018. The unsuccessful UWO application in the Aliyev case, which I mentioned at Second Reading, left the NCA facing £1.5 million in legal costs.
Limiting the liability of enforcement authorities to pay costs in UWO proceedings is a welcome step, but it is a piecemeal intervention which does not address the chilling effect of adverse costs orders in civil recovery proceedings more broadly. This proposed amendment seeks to ensure consistency of approach in civil recovery proceedings so that adequate cost protections encourage enforcement authorities to put their economic crime-fighting tools to effective use. At present, the prospect of prohibitively expensive legal costs effectively renders certain assets out of the reach of underresourced law enforcement agencies. We need a new, consistent cost protection regime for law enforcement agencies and regulators under the Proceeds of Crime Act as a whole.
I am very grateful to Spotlight on Corruption for raising this issue and laying the grounds for this amendment. The starting point should be that a law enforcement body or regulator should not be ordered to pay costs where it is unsuccessful in bringing or defending civil proceedings. This would have the effect of each party bearing its own costs. However, the court should retain discretion to depart from this default rule in cases where there is good reason. This could include where the law enforcement body or regulator has acted unreasonably in bringing or defending proceedings and where the interests of justice and fairness would be offended, including where substantial financial hardship is likely to be suffered by the successful party if a costs order is not made.
I very much hope that the Government see the merits of Amendment 90 and of applying it in the same way to Scotland—the notice to oppose the Question that Clause 48 stand part of the Bill would have exactly that effect. I beg to move.
Baroness Smith of Basildon (Lab)
My Lords, I will be brief. I have listened very careful to the noble Lord, Lord Clement-Jones, and my understanding is that the Government are seeking to protect the enforcement bodies, such as the National Crime Agency, from the costs of legal action. Clearly, it is important to provide these agencies with an element of cover from being pursued for costs, as they must be free to investigate activities as they see fit and not fear the potential costs of bringing what they believe to be a legitimate case. As we have heard already tonight, the resources available to those being investigated is often hugely significant.
The noble Lord, Lord Clement-Jones, is proposing a much broader approach on this than in the government clauses, applying the principle to all civil recovery proceedings under Part 5 of the Proceeds of Crime Act 2002, not just to unexplained wealth orders. The Bill is quite narrow in scope, and the Government may not see fit to put this into this legislation, but I hope that there is an opportunity to debate this further. I would be grateful if the Minister could say something not just on whether it fits into this Bill but on the Government’s general approach to the issue.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, I thank both noble Lords for their points on this amendment. The Government are as one with the noble Lord, Lord Clement-Jones, that agencies must not be limited in their efforts to investigate wrongdoing and protect the public from harm. He has tabled an amendment which touches on this very concern.
The noble Lord will be aware of the significance of the amendments that the Government have introduced to reform the cost rules as applied to UWO cases. Protection from costs mean that the court only has discretion to award costs against an enforcement agency, as he knows, if it acted dishonestly, unreasonably, improperly, or not on grounds that appear to be reasonably sound. The UWO procedure is an investigative tool and is not determinative of civil rights or obligations. It is used to obtain information about the ownership of certain property that may not otherwise be available to an enforcement agency.
Existing case law—as the noble Lord has pointed out, in magistrates’ courts through Part 5 applications—enables them to routinely adopt a position that they will not order costs against law enforcement where the agency has acted honestly, reasonably, properly and on grounds that reasonably appeared to be sound. However, this does not occur in High Court cases, where the costs involved are often much higher and for which protection is now given in the Bill in relation to UWO cases. The Government will ensure we are doing everything appropriate to ensure law enforcement agencies are equipped to take on corrupt elites, and their costs liabilities are appropriately mitigated. I hope that gives the noble Lord the comfort that he needs.
Lord Fox (LD)
I just have a question. In the context of this Bill, the choice of UWOs was regarded by many as curious because it was a niche activity until such time as it was plunged centre stage by this Bill. There is a whole range of other things. In choosing to deal with cost protection for one element, there seems to be an imbalance. My noble friend used the words cost protection regime. Would the Minister acknowledge that there is scope for going away and spending time on a review of the overall cost protection landscape and coming back with something that is joined up rather than piecemeal—which is what we have got here?
Baroness Williams of Trafford (Con)
Yes, I think I was clear in my opening remarks that I am not at odds with the noble Lord, Lord Clement-Jones, at all. The noble Lord, Lord Fox, is absolutely right that, in the longer term, we should look across the whole cost landscape. What I am trying to say is that, in protecting agencies incurring costs in Part 5, it unintentionally removes the current clauses relating to Part 8. I am trying to differentiate between Part 8 and Part 5 of POCA. It is utterly unintentional, I am sure, but I hope that helps the noble Lord.
Lord Clement-Jones (LD)
My Lords, the Minister is speaking the language I understand now—if it is technically flawed, then of course it is ripe for withdrawal. I welcome what the Minister said about getting consistency across the landscape, because that is clearly important. There is absolutely no reason why it should not be across the whole of the proceeds of crime landscape.
Perhaps I can squeeze a commitment out of the Minister. We managed to get the noble Lord, Lord Callanan, to commit to looking at certain aspects of enablers in the second economic crime Bill—I think we need to call it the ECB 2 now. If the Minister could give us a commitment that the Government will look at this question of the cost landscape as part of the second round, when we can consider these issues in much greater detail and at greater length, then I would be entirely satisfied.
Baroness Williams of Trafford (Con)
I am very happy to explore the cost landscape after this Bill because, as I said, I am principally not at odds with the noble Lord at all.
Lord Faulks (Non-Afl)
I was somewhat concerned by the lack of response to what the noble Lord, Lord Fox, said about UWOs being a niche activity. I hope the Minister can reassure the Committee that one of the effects of the change in the Bill will be that they will very much not be a niche activity. Certainly the original intention—I understand, having read the legislation that brought them in—was that there would be 20 per year. Can we have some reassurance that there are going to be a great deal more and it will not be a niche activity?
Baroness Williams of Trafford (Con)
I share the sentiment of my noble friend that they will not be a niche activity. The measures in this Bill, particularly in terms of costs, will make it far easier for our law enforcement agencies to not be stymied by costs in bringing these things forward.
Lord Clement-Jones (LD)
My Lords, I am grateful to the Minister for her responses. As she understands, one of my main motives is to bring pleasure to the Treasury. Given that the NCA’s budget—we talked about its budget—for crime prevention is, I think, something like £4 million and there was £1.5 million in costs in the Aliyev case, we would clearly all be winners if this review takes place. I thank the Minister for that commitment and, in the meantime, beg leave to withdraw the amendment.
Baroness Neville-Rolfe
“(2A) In section 1, after subsection (10) insert—“(11) Before making any regulations under this section the Secretary of State must lay an impact assessment before Parliament.(12) The Secretary of State must specify a date on which regulations made under this section cease to have effect.””Member’s explanatory statement
This is a probing amendment and is intended to seek confirmation that an impact assessment will be prepared before such regulations are laid. It also provides for appropriate sunset Clauses.
Baroness Neville-Rolfe (Con)
My Lords, as we move on to the final group, I rise to move my Amendments 91 and 96. I was sorry that the short notice prevented me speaking at Second Reading, and as the Bill may have implications for trade and investment, I declare my interest as the chair of the UK-ASEAN Business Council.
Today we are rightly focused on Russia, and are full of sympathy and horror for all that is happening in Ukraine. This Bill has been accelerated and we all want to speed it on its way. I am well known for taking a contrarian view to try to tease out important issues as part of the vital role of scrutiny by the House of Lords. For example, on the Covid legislation, I emphasised the importance of perverse effects and cost benefit, and I think I was right to worry about the adverse impact on health problems other than Covid, such as cancer, and the harm to children’s education, and on the social agonies of the pandemic. Happily, that is behind us thanks to the Government’s brilliant record on vaccination.
As my noble friends the two Ministers said in their very helpful recent letter, the economic crime Bill is novel, particularly in relation to property rights, and largely unprecedented in other countries. In most respects, it will also apply very widely and way beyond Russia, as the Minister made clear. It is concern about that which is behind my amendments.
There are three aspects. First, while a good deal is on the face of the Bill, there are also wide-ranging regulation-making powers, so I propose that any such regulations should be subject to an impact assessment before being laid. The object of this is to ensure that they are properly thought through and to minimise red tape, bearing in mind that the Bill extends beyond the current crisis. I am very grateful for the three impact assessments that have been produced by BEIS, the Home Office and HM Treasury. Helpfully, the BEIS impact assessment discusses on page 36 a Malaysian investment—Battersea power station. Fortunately, it concludes—presumably with its knowledge and agreement—that the new rules would not have resulted in new information being made available or any substantive compliance costs relative to the value of the investment.
However, with my practical mien and business experience, I know how easy it is to get the detail wrong in legislation and regulation of the kind we are debating. The money laundering regulations are a good example. The compliance costs on the honest, including, but not confined to, the rules on politically exposed persons—such as affect some noble Lords—are often burdensome. The bureaucracy involved is also bad for the UK economy without, apparently as we have heard, actually catching the bad guys. So I believe we must stick to the discipline of impact assessments which requires us to balance these matters and do our best to get the rules right, simple and clear across the wide areas covered by this Bill. We also need proper enforcement, probably by investment in tough public sector experts, not external lawyers.
Secondly, I am seeking assurances on the use of sunset clauses. To those noble Lords who are remainers, I refer them to some good practise by the EU—the five-year reviews in single market legislation. These reviews were uncomfortable for incumbents, both the civil servants or the large or dominant external players, but they were good for new thinking and for new entrants. My amendment asks for a specific end date to regulations. But, of course, it is possible to vary the timescale and provide for extensions, as was done with the Covid regulations.
My final area of concern, articulated in Amendment 96, is that there should be a review of all the provisions we are putting so rapidly into law in this Bill and the regulations and guidance made under it. That would take place a year after its passage or at some other suitable period, allowing for the economic crime Bill part 2. It would cover, first, its effectiveness in achieving the objectives set out in the Explanatory Notes; secondly, its impact on parties involved, including small business, whose investments in the UK might dry up needlessly; and, finally, enforcement, especially enforcement by Companies House. I share the concerns expressed by others on the need for accuracy, resourcing and effective enforcement, and I look forward very much to hearing from the noble Lord, Lord Brennan, and my noble friend Lord Agnew of Oulton.
I have no wish to delay the Bill. Indeed, I am proud to have played a part as the Minister responsible for the Small Business, Enterprise and Employment Act 2015, which contained the domestic provisions on beneficial ownership discussed here in this very House. I also worked on the groundwork for David Cameron’s commitment to a register for foreign companies which own or buy property in the UK. The importance of getting this on to the statute book quickly has been underlined today by Ukraine’s tragic circumstances. I beg to move.
Lord Cromwell (CB)
My Lords, I recognise that we are on the home straight. On Amendment 91, the House needs to be clear whether we are having a sunset clause or not. My understanding from the outset from talking to Ministers is that we are not, and that this is going to be a permanent piece of legislation. In fact, throughout the two days we have debated this, we have been talking up having ECB 2—something I coined, which I am glad everyone has adopted—to fill in the gaps and be the unspecified bag at Christmas in which we are all going to find our favourite toys, but we shall see.
Baroness Neville-Rolfe (Con)
Just for clarification, my proposal is for sunset regulation within the regulations, not within the Bill itself—which will, of course, be entirely permanent.
Lord Cromwell (CB)
My mistake; I struggle with joined-up writing.
Since I get only bite of the cherry and have an amendment coming up in my name, I will tackle both Amendments 93 and 95 on resources. It is widely acknowledged and was highlighted emphatically by speakers at Second Reading that the resourcing of those responsible for the difficult work of identifying, investigating and prosecuting those covered by the Bill are currently inadequate. In the Minister’s letter of 11 March, which I referred to earlier, page 6 refers to an overall package of £400 million and the creation of a kleptocracy cell in the National Crime Agency and says that the NCA has “surged additional officers”. I am aware that the NCA has obtained fewer than five prosecutions for economic crime offences in the last five years and has seen its budget cut, despite calls for increases. The number of investigators at the proceeds of crime centre has declined, despite Parliament raising concerns. I simply do not know whether the resourcing now referred to is sufficient, but I am told that a figure of £1.7 billion is a more realistic amount to get this job done.
Amendment 95, to which I have added my name, calls for an annual review of the suitability of funding arrangements for enforcement agencies. A theme of our debates has been the need to revisit what we have discussed and agreed to here. It is pure vanity to pass legislation that cannot be enforced and resourced effectively. This amendment will be useful in making sure that a proper focus on resourcing is maintained. I therefore support Amendment 95 or, if it is preferred, Amendment 93, which has much the same effect.
Turning finally to Amendment 94 in my name, I am very grateful to the noble Lord, Lord Thomas, for adding his name to it. We have heard an awful lot about enablers during our debate, which draws a pantomime hiss that used to be reserved for lawyers, accountants and bankers—but, unfortunately, we all fall into that category of enablers now.
A number of speakers, myself included, raised the issue of SLAPPs, or lawfare, at Second Reading. As is appropriate at this stage, I do not propose to rehearse in detail what was said then. Nevertheless, it is a well-established fact that UK law firms and others—some, anyway—undertake deliberate intimidation tactics known as lawfare to prevent journalists and others bringing matters of public interest to light.
It is further well known that this has ensured that information in the public interest is regularly neutered or hidden. The rule of law requires equality before the law, but this behaviour goes well beyond any reasonable approach to a defence of reputation. It is the dark side of our legal system, where inequality of arms means that the wealthy can—at times, using ill-gotten gains—out-resource those on whom we as a society rely to find out the truth and shine a light into dark places.
The Defamation Act 2013 sought to introduce some protective measures, but this is a complex area of law that not only is costly but carries the risk of liability for the other party’s costs. It is this prospect of bankruptcy or insolvency that is primarily used to intimidate journalists and other organisations. Furthermore, such a defendant against a claim may be unable even to obtain a legal representative willing to take on the risk of cost recovery from the other side. Even what are known as “trials of preliminary issue” regularly run up costs of £25,000 or more, and a full trial will often cost well above £500,000. Even if successful, the defendant will be faced with the irrecoverable portion of their costs, which can also be very substantial—and we should remember that this does not take into account all the work, time, disturbance and anxiety before a court action even arises.
We must not allow the Bill’s purpose—tackling dirty money and illicit practices of the sort that it covers—to be undermined by allowing the wealthy to abuse our legal system in order to intimidate and muzzle the free press in this way. Amendment 94 would require the Government to assess how the Bill might be frustrated, have its impact blunted and its implementation thwarted by such conduct, and it would require the Government to share their findings with Parliament.
The Bill is operating in a very compressed timeline, and I am grateful to the Minister for his email exchange with me over the weekend on this issue. I note that the Deputy Prime Minister announced on Friday the launch of an urgent call for evidence in this area, and I have the Minister’s assurance that this call for evidence will not be just a listening exercise but that:
“Where action is needed, we will take it quickly and effectively”.
The origin of the Bill’s arrival here is the Russian invasion of Ukraine. An immediate step by the Putin regime has been to shut down the channels of free communication and free media within Russia. Surely we must ensure that we do not allow the same regime to do the same in the UK. I therefore invite the Minister to confirm on the record the Government’s commitment to this, not just as a one-off inquiry but on a regular basis, as foreseen in Amendment 94. I also ask him to confirm that the action he has referred to will include specific provision for it in ECB 2. I beg to move.
Lord Thomas of Gresford (LD)
It is a real pleasure to follow the noble Lord, Lord Cromwell. I spoke at length on this matter last Wednesday and I do not propose to speak on it again. Three things have happened since then. The Lord Chancellor has called for evidence, as the noble Lord pointed out. My Private Member’s Bill, which I referred to, seems to have reached its final form, and I hope it will be progressed quickly. I very much hope that this problem is properly dealt with in a very short time, and I await the Minister’s response.
Lord Agnew of Oulton (Con)
My Lords, I shall speak in support of my amendment, which seeks to achieve two things: an annual review of the funding adequacy of our crime-fighting agencies in this area, and a report within three months of the Bill, and annually thereafter, to set out how well we are managing this whole area.
I know we will hear warm words from the Minister about various sums of money—£400 million and so on—but the brutal reality is that this whole thing has been abysmally funded; that is the only way we can describe it. The noble Lord, Lord Cromwell, is right that the NCA’s own funding has fallen by some 4% in real terms at a time when international crime has been soaring.
Viscount Waverley (CB)
My Lords, given the hour, I will be concise and crack on in support of the need for sufficient human and financial resources being made available, given the global implications.
Despite high-level government commitments on fighting economic crime, the Government have hitherto failed to invest sufficient resources to ensure that enforcement is effective. Reinforcing the case is paramount. We should double key law enforcement annual budgets from £852 million to £1.7 billion. A £2.7 billion increase in funding for national and local agencies to tackle serious and organised crime and to improve the system’s capabilities across digital, forensics, covert surveillance and financial investigations, to match the increasing technological sophistication of the serious and organised crime groups operating in the UK, is necessary, with budgets to invest in structures, skills, capabilities and technologies across the system.
We should double the budget for sanctions enforcement. In the past three years, the NCA has conducted only three criminal investigations into sanctions breaches, with no resulting prosecutions. It has just 40 employees.
We should create a central economic crime-fighting fund out of the money generated by law enforcement’s economic crime activity. If the proceeds had been reinvested into the agencies, on top of their core budgets, overall enforcement spending could have been provisionally increased by an additional £748 million a year—an increase of approximately 93% on current funding levels. This would allow investment in state-of-the-art IT infrastructure and data analysis capabilities. This central fund would replace the system for redistributing the proceeds of asset recovery—the asset recovery incentivisation scheme—which is broken.
Working with the judiciary to ensure better judicial management of cases to strike out abusive litigation tactics is key, in addition to working with industry to develop an enforceable model litigant code for lawyers, to prevent the use of stalling and spurious tactics that waste court time and drain public resources, and allowing law enforcement bodies to raise salaries within their budgets, so that they can be more competitive in the salaries they provide to attract the best and brightest.
I will bring my remarks to a close. We must allow law enforcement to spend more on legal fees to get the best legal advice; prosecuting and investigating bodies cannot compete. We need specialist economic crime judges; enforcement bodies face a UK court system with few judges specialised in economic crime or confiscation. Finally, we must raise Companies House fees to £100. Current fees of just £12 for an incorporated company are too low, allowing considerable abuse of the system. Companies House needs to become a key digital data hub to help law enforcement and provide a service for the whole of the UK about suspicious corporate behaviour, rather than its current state as a passive receiver of false or inaccurate information.
Lord Thomas of Cwmgiedd (CB)
My Lords, I rise briefly to support the amendment from the noble Lord, Lord Agnew. Over the years, one has seen concentrations move as to what parts of the criminal justice or investigation system matter. It is important to appreciate that this will be expensive, but we must have a system that, as regards the resources we give to justice, is open and transparent. There is no way this can be done without a proper annual report. Too often have I heard, “Oh, we can have an efficiency here or an efficiency there; we’ll do a little bit less of that or find incentives somewhere else”. No, that is not good enough for the task that faces us, and our nation, in ensuring the reputation of the City of London. I therefore warmly support the view that we should have a proper economic and financial analysis of the tools needed.
Lord Fox (LD)
We are in danger of reaching the end of this in unanimous agreement, so I shall introduce a little rancour in responding to the amendment from the noble Baroness, Lady Neville-Rolfe. When she read the Hansard report of the Second Reading, she will have seen a strand going through a number of speeches that said the purpose of the Bill must be permanent rather than a “here today, gone tomorrow” sort of purpose—a fashion. Her notion of sunset clauses hits counter to that. She is right that regulation has to be fit for purpose and that there should be reviews, and I welcome her joining the chorus for reviews that has been going throughout both the Second Reading and the Committee stage. I think the first opportunity for a review of the performance of ECB 1 and the regulations that make it work will probably be when we get to ECB 2. Thereafter, an annual review is a good idea.
We have heard from many noble Lords about progress on the subject of strategic litigation. I hope the Minister is able to confirm that this small amount of momentum will be able to pick up over the next few months as we go forward, perhaps focusing on my noble friend’s Private Member’s Bill.
A few moments ago the noble Lord, Lord Faulks, asked the noble Baroness, Lady Williams, whether UWOs were going to be a minority sport or something pursued in number. She has left, leaving the noble Lord, Lord Ahmad, to explain how it will be paid for. Unless there is money to pay for it, it will remain a minority sport. The noble Lord, Lord Agnew, and the noble Viscount, Lord Waverley, clearly encapsulated the point that none of this can happen unless the investigating and prosecuting forces are both skilled and resourced to deliver it. That is why I was pleased to co-sign Amendment 95 from the noble Lord, Lord Agnew. I look forward to hearing from the Minister how much money will be forthcoming and when.
Baroness Smith of Basildon (Lab)
My Lords, this seems an appropriate group on which to end Committee. It seems almost as if we have gone full circle, as there has been a similar theme throughout the debates at Second Reading and in Committee.
This group of amendments brings two things to the debate. When I spoke first today I made the point about the tension between us recognising the inadequacies of the Bill, with the comments made about ECB 2—which has now become part of the common language of your Lordships’ House—alongside acknowledging the necessity of the legislation. However, it also shows the determination—I am distracted by someone talking—of your Lordships’ House to make sure that the legislation is effective.
The only way we can do that is through the kinds of reviews that have been talked about, to ensure that, when we come to ECB 2, we will use the information—both the positives and the negatives as regards whether this legislation is working—to ensure that we can plug the gaps and take on other issues. I hope to see Companies House issues in the next legislation as well. On the issues we have been talking about—the resources needed, the commitment needed and the reports to Parliament—unless we have those reviews and assessments in place, we will not be able to do what needs to be done in ECB 2 or to plug any gaps we find here. Some kind of assessment, perhaps on the timescales envisaged in the amendment—an annual review to Parliament seems a very sensible way forward—are absolutely essential.
The only thing I disagree with the noble Baroness, Lady Neville-Rolfe, on is the importance of getting regulations as quickly as possible. I hope that, alongside those regulations, we will see some kind of impact assessment. Unless the Government know at least in part the impact that the regulations will have, there is no point in tabling them. We would not want to delay essential regulations in waiting for that but it is important that we have more information at all times.
I will flag up something that I raised in an earlier debate and which the Whip who was answering for the Government did not respond to. We hope that, when we come back on Report, we will have a commitment that we will see ECB 2 in the next Session of Parliament. We also want an assurance that that will be early in that Session. We have seen already that there is huge expertise in your Lordships’ House and that, when we have proper time for debate, we have better legislation. One of the saddest things about this Session of Parliament is that we have only just had the Second Reading of the Elections Bill. We have weeks to go and we are trying to cram a quart into a pint pot, and, having been here at two and three o’clock in the morning, I do not think that is a great way to make laws. I hope that we will see something of this importance very early on in the next Session of Parliament, which will enable this House to use its expertise to have proper debates and make a proper contribution.
All that remains to be said is that we want to have reviews in whatever form they take. These reviews and assessments will be absolutely essential if we are in any way serious about making this work.
The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, I thank all noble Lords for these amendments. I must admit that, as we reach the end of Committee, I find myself in a somewhat novel position as the Foreign, Commonwealth and Development Minister to your Lordships’ House, talking to some amendments which have been raised in other departments. I am grateful to all noble Lords who have engaged directly with my noble friend Lord Callanan, my noble friend Lady Williams and me on various issues.
I thank all Front-Benchers for their direct engagement. It was an intense weekend of toing and froing for many people, but again, it shows the best of your Lordships’ House when we come together on such an important issue. Talking more broadly as the Sanctions Minister and the FCDO Minister, everyone understands the importance of getting the Bill through at the earliest opportunity, and I am grateful for noble Lords’ engagement in Committee.
Lord Empey (UUP)
Before the Minister sits down, while progress has been made on providing funding for the investigatory bodies, given that we expect imminent and immediate impact on investigations from the passage of the Bill, what assurance can he give the Committee that personnel with the necessary qualifications and experience will be available in the very short term, even though the funding may be following them?
Lord Ahmad of Wimbledon (Con)
My Lords, within the agencies, particularly the NCA, of course we have great expertise and insights. I cannot provide the noble Lord with specific numbers but, as I said earlier, the Government very much stand by the principle that in introducing these regulations and these new powers, and when it comes to the implementation of our sanctions policy, we need to ensure that we are fully and appropriately resourced so that those people who are sanctioned can be acted upon.
Lord Burnett (LD)
Further to the question from the noble Lord, Lord Empey, has the Minister consulted the Inland Revenue, which deals with anti-avoidance matters on a daily basis and has considerable expertise in these matters, and in the artificial transactions that often occur and come under its scrutiny?
Lord Ahmad of Wimbledon (Con)
My Lords, I stray into the work of other departments—both the Home Office and the Treasury—but I can assure noble Lords that this is an all-of-government approach, ensuring that not only are we acting appropriately in whatever department we need to act, but of course that there is appropriate funding and support for the actions we are taking.
Baroness Neville-Rolfe (Con)
My Lords, I am very grateful to all those who have taken part in this short debate. I thank my noble friend the Minister for his response. My probing amendment applied to Part 4 of the Bill, of course—so, to all regulations made under it—but I understand exactly where he was coming from on the sanctions provisions.
As we are short of time, I will dispense with the customary summary of the excellent points that have been made this evening, except to emphasise to the noble Baroness, Lady Smith of Basildon, that I am as keen as anyone else to avoid delay. I was glad that she also saw value in impact assessments appropriately tabled.
I think there is a measure of agreement across the Committee on the need for adequate enforcement of the provisions in the Bill and on the need to provide the necessary resources. I will return to this matter, to the idea of effectiveness reviews and indeed to the various regulations, in due course. I agree with my noble friend the Minister that the House has worked well on this Bill to get it through Committee in such a short time—but for now I beg leave to withdraw my amendment.
Economic Crime (Transparency and Enforcement) Bill
Monday 14th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)
Lord Callanan
Member’s explanatory statement
This amendment requires an application for registration as an overseas entity to include the information and statement required by subsection (2A) (information about trusts).
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I thank everyone who contributed to a lively and interesting Committee. I will move these government amendments on trusts. The Government seek to make amendments that address concerns raised in this House and the other place about trusts. These amendments set out that, where a trustee of a trust or equivalent arrangement is a registrable beneficial owner, the overseas entity must give them formal notice to provide their personal information and information about the trust. This information will be disclosed to HMRC, law enforcement agencies and other specified persons with a public function for the purposes of taking action with any offences they commit. I beg to move.
Lord Coaker (Lab)
I am grateful to the Minister for bringing these amendments forward following the wide-ranging discussions we had earlier, when we had a full exploration of all the issues.
Lord Callanan
“(2A) Where an application includes information that a registrable beneficial owner is a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the application must also include—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.”Member’s explanatory statement
This amendment provides that where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must include additional information about the trust.
Lord Callanan
Member’s explanatory statement
This amendment is consequential on changes to clauses 4, 7 and 9.
“(f) whether the individual meets that condition by virtue of being a trustee.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner who is an individual includes information about whether the individual is a trustee.
“(g) whether the individual is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner who is an individual includes information about whether the individual is designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.
Lord Callanan
“(g) whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner which is a government or public authority includes information about whether the entity is designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.
Lord Callanan (Con)
My Lords, the Government have put forward a number of amendments to the register of overseas entities provisions. These amendments will address a number of the concerns of Members of this House. The amendments expand the information requirements for registrable beneficial owners to include information about whether they are designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.
The amendments also provide a revised threshold for the offence of providing false statements. These no longer have to have been submitted knowingly or recklessly. Rather, it will be an offence when the statement is merely misleading, false or deceptive and the person has no reasonable excuse for supplying such a misleading statement, with an additional aggravated offence carrying a higher penalty where it can be proved that a false statement was made knowingly.
The Government seek to make amendments to require the Secretary of State to consult with Scottish and Northern Ireland Ministers before making regulations to amend parts of the Bill that legislate on devolved land law matters. I beg to move.
Lord Callanan
“(h) whether the entity meets that condition by virtue of being a trustee.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner who is a legal entity includes information about whether the entity is a trustee.
“(i) whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner which is a legal entity includes information about whether the entity is designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.
“PART 4A TRUSTS7A_(1) The required information about a trust is—(a) the name of the trust or, if it does not have a name, a description by which it may be identified;(b) the date on which the trust was created;(c) in relation to each person who has at any time been a registrable beneficial owner in relation to the overseas entity by virtue of being a trustee of the trust—(i) the person’s name,(ii) the date on which the person became a registrable beneficial owner in that capacity, and(iii) if relevant, the date on which the person ceased to be a registrable beneficial owner in that capacity;(d) in relation to each beneficiary under the trust, the information that would be required under paragraph 3(1)(a) to (c) or 5(1)(a) to (e) if the beneficiary were a registrable beneficial owner in relation to the overseas entity;(e) in relation to each settlor or grantor, the information that would be required under paragraph 3(1)(a) to (c) or 5(1)(a) to (e) if the settlor or grantor were a registrable beneficial owner in relation to the overseas entity;(f) in relation to any interested person (see sub-paragraph (3))—(i) the information that would be required under paragraph 3(1)(a) to (c) or 5(1)(a) to (e) if the interested person were a registrable beneficial owner in relation to the overseas entity, and(ii) the date on which the person became an interested person.(2) In sub-paragraph (1)(c) “name”, in relation to an individual, has the meaning given by paragraph 3(2).(3) In sub-paragraph (1)(f) “interested person”, in relation to a trust, means any person who, under the terms of the trust, has rights in respect of—(a) the appointment or removal of trustees, or(b) the exercise by the trustees of their functions.”Member’s explanatory statement
This amendment sets out the required information about a trust for the purposes of the amendments to clauses 4, 7 and 9.
Member’s explanatory statement
This amendment expands the power to make further provision about the information required by the Schedule so that the power extends to the new paragraph 7A.
Lord Callanan
Member’s explanatory statement
This amendment requires an overseas entity when complying with the updating duty to include the information and statement mentioned in subsection (2A) (information about trusts).
Member’s explanatory statement
This amendment requires an overseas entity when complying with the updating duty to include the information and statement mentioned in subsection (2B) (information about trusts).
“(2A) Where information provided under subsection (1)(a) includes information that a registrable beneficial owner is a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the overseas entity is also required by subsection (1)(a) to provide—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.(2B) Where information provided under subsection (1)(b) includes information that a person who became or ceased to be a registrable beneficial owner was a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the overseas entity is also required by subsection (1)(b) to provide—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.”Member’s explanatory statement
This amendment requires an overseas entity, when complying with its updating duty, to provide additional information and statements about trusts, where relevant.
Member’s explanatory statement
This amendment is consequential on the amendments to clause 7(1)(a) and (b).
Member’s explanatory statement
This amendment is consequential on the amendment to clause 7(1)(b).
Lord Callanan
Member’s explanatory statement
This amendment requires an overseas entity when applying for removal from the register to provide the information and statement mentioned in subsection (2A) (information about trusts).
Member’s explanatory statement
This amendment requires an overseas entity when applying for removal from the register to provide the information and statement mentioned in subsection (2B) (information about trusts).
“(2A) Where information provided under subsection (1)(b) includes information that a registrable beneficial owner is a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the overseas entity is also required by subsection (1)(b) to provide—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.(2B) Where information provided under subsection (1)(c) includes information that a person who became or ceased to be a registrable beneficial owner was a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the overseas entity is also required by subsection (1)(c) to provide—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.”Member’s explanatory statement
This amendment requires an overseas entity, when applying for removal from the register, to provide additional information and statements about trusts, where relevant.
Member’s explanatory statement
This amendment is consequential on the amendments to clause 9(1)(b) and (c).
Member’s explanatory statement
This amendment is consequential on the amendment to clause 9(1)(c) about trusts information.
Lord Callanan
“(i) is entered, on or after 8 December 2014, as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland,”Member’s explanatory statement
This amendment expands the scope of circumstances where an overseas entity is registered as the proprietor of a relevant interest in land for the purpose of clause 9 (to include, for example, Keeper-induced registration) by removing the requirement for there to have been an application for registration.
Lord Callanan (Con)
My Lords, the Government are putting forward a group of technical amendments on land registration and transactions in Scotland, in addition to some further substantive amendments. These amendments include obligations on overseas entities that disposed of land between 28 February 2022 and the end of the transitional period to outline the details of the beneficial ownership of the entity at the time of the transfer. I beg to move.
Lord Coaker (Lab)
My Lords, I want to say a few things about this group of amendments, and in particular to speak to my Amendment 62. As the Minister knows, we are generally supportive of the amendments in this group. The Government, to be fair, have moved in several areas, and that is to their credit. Once again, I thank the Minister and his ministerial colleagues for their engagement over the course of these last few days with respect to this Bill. It has been most helpful.
Earlier today, the Minister outlined several reasons for opposing a reduction in the transition period from six months to 28 days. In the spirit of compromise, we therefore tabled an alternative provision of 90 days for the transition period, and that is the subject of my Amendment 62. He will also know that this amendment is supported by the body representing accountants, which has said that it believes three months is a reasonable figure for the transition period. I shall not go over all the arguments on the length of the transition period that we have had today and at Second Reading, as the Minister will be very well aware of them. Noble Lords are worried that this will allow people to avoid the new rules and regulations and be able to circumvent them.
Furthermore, given the potential lengthy process that needs to be followedbefore Part 1 of the Bill can be formally commenced, we believe that there is also a case for accelerating the registration period. As I again said to the Minister, the commencement period is subject to the Secretary of State’s decision for Part 1, so there is no clarity as to when that will actually start. If there is a six-month transition period and six months until it is commenced, that will be a year. Therefore, we seek clarity from the Minister, even at this late stage, about the implementation of the measures in the Bill, not only with respect to the commencement date, but to some of the other issues. Can the Minister say anything further?
We would, of course, be delighted if the Minister were able to accept the amendment, but if he is to hold firm, would he be able to make certain commitments so that we would be clear on the steps that the Government are taking to ensure Parliament is appraised of the progress between this Bill receiving Royal Assent and the next, more substantial piece of legislation to be introduced—namely the Bill that has become known as economic crime Bill 2? We want to know something about the effectiveness of the measures within this Bill and the way forward to the next Bill.
Can the Minister confirm the scope of the next Bill? Will that be broad, and will there be an opportunity to amend some of the measures in this Bill as we move forward to the next Bill? As we know, many noble Lords have raised the issues within this Bill of the fact that there has not been proper scrutiny. It may well be that many of the points that noble Lords have raised will actually come to fruition, but we need some assessment of that from the Government so that we can then inform our deliberations with respect to the economic crime Bill 2.
Also, as I say, there is a general belief that, although we are allowing the Bill to pass because of the emergency we face, there are still significant weaknesses and omissions within it. There is, therefore, a need for the next Bill to be brought as soon as possible—that is absolutely crucial—rather than at some time in the future. Can the Minister give any assurances to the House as to when he expects the next economic crime Bill to come before your Lordships in order to discuss that? There are a number of questions for the Minister, and I look forward to hearing the answers to them to determine whether we wish to test the opinion of the House or not.
Lord Fox (LD)
Very briefly, my Lords, we thank the noble Lord and congratulate him on tabling this amendment. We on these Benches still remain concerned about the cumulative delay of transition and commencement—or the potential cumulative delay—so we are pleased that the Minister has another chance to respond to that particular concern. We also share the concerns of the noble Lord, Lord Coaker, about the speed with which ECB 2 arrives in your Lordships’ House.
Lord Callanan (Con)
I thank both the noble Lords, Lord Coaker and Lord Fox, for their extremely constructive engagement over the course of the weekend and over the course of a number of meetings and chats today. I really am very grateful for their constructive attitude and for their willingness to be open to the arguments that we have deployed in why we genuinely do not think that reducing the transition period further is a runner, for a whole variety of reasons we have discussed—I will not go into detail now. But I am grateful—I want to put that on record—for the support of the Opposition parties in accepting this as emergency legislation that we want to get through as swiftly as possible and passed down to the other place.
I also note their interest in seeing a rapid introduction of the measures of this Bill and their focus on ensuring its effective implementation—and also their interest in a wider range of issues that can be covered in the Bill. The forthcoming legislation on economic crime will, as I have said previously, provide for significant reform of the powers of the Companies House registrar. These will directly interact with the provisions of this Bill, enhancing further its effectiveness—for instance, by providing greater powers to query and act on the information on the register. I would be happy, therefore, to commit the Government that this House will have the opportunity to review the effectiveness of the current legislation in that wider context of our discussion on the new powers. I am also committed to the rapid implementation of the measures in this Bill, and I would also be happy to commit to updating the House on the Government’s progress on this within six weeks of this measure achieving Royal Assent.
I can reassure noble Lords that the further economic crime Bill that the Government intend to introduce in the next Session will be a broad one. We will, of course, consider and carefully examine any amendments put forward in either House which serve to strengthen our frameworks for tackling economic crime. As my honourable friend the Minister for Small Business, Consumers and Labour Markets—who I am pleased to see at the Bar of the House—said in the other place last week, we are committed to bringing forward the next economic crime Bill early in the next Session.
I hope that has provided sufficient reassurance for the noble Lord and that, therefore, he will feel able to withdraw his amendment.
Lord Coaker (Lab)
I thank the Minister very much for that reply. It does show that the parliamentary process works, because the Government have moved in a significant way to meet the concerns not only of myself and other noble Lords on this side but, indeed, noble Lords across the Chamber. These concerns are not resolved, but the Minister has given us a way forward, in particular by reviewing the effectiveness of the current legislation. That is an important concession from the Government, which will allow us to see whether the concerns raised about the Bill come to fruition or whether the Government are right to say that we are worrying about things that will not come to pass.
An update on progress within six weeks of Royal Assent is a significant step forward and another important concession from the Government. As my noble friend Lady Smith has raised on a number of occasions, we are particularly pleased about the Government’s commitment to an economic crime Bill No. 2 early in the next Session. I think the word “early” is significant for all of us because we believe that there are things that will need to be changed, and this means we will have the opportunity to do so. I thank the Minister once again for that.
Given the concessions that the Government have made and the demonstration of the way that the parliamentary process has worked within this context, I will not press Amendment 62.
Lord Callanan
“(iii) is the tenant under a lease that was registered in the Land Register of Scotland on or after that date, or”Member’s explanatory statement
This amendment rephrases clause 9(8)(b)(iii) to ensure consistency with the language used at paragraphs 10(1) and 11(1) of Schedule 4.
Member’s explanatory statement
This amendment is consequential on the amendment inserting a new subsection (10) into clause 9.
“(10) For the purposes of subsection (8)(b)(i)—(a) the reference to an overseas entity’s being entered as proprietor in the proprietorship section of a title sheet is a reference to the name of the entity being so entered, and(b) the date on which an overseas entity is entered as proprietor in the proprietorship section of a title sheet is, where the entry is made by virtue of an application for registration, the date of registration as determined under section 37 of the Land Registration etc. (Scotland) Act 2012 (date and time of registration).”Member’s explanatory statement
This amendment applies terminology used in the Land Registration etc.(Scotland) Act 2012 to clause 9(8)(b)(i) to ensure consistency between the two legislative schemes.
Lord Callanan
(i) the required information about each registrable beneficial owner, and(ii) in respect of any registrable beneficial owner who is a trustee, the required information about the trust.”Member’s explanatory statement
This amendment requires an overseas entity to take reasonable steps to obtain information about trusts, where relevant.
(c) if the person is a registrable beneficial owner by virtue of being a trustee, to confirm or correct any of the required information about the trust that is specified in the notice and to supply any of the required information about the trust that the notice states the overseas entity does not already have.”Member’s explanatory statement
This amendment requires an information notice under clause 12 to deal with information about trusts, where relevant.
Member’s explanatory statement
This amendment removes the ability of the Secretary of State to exempt an individual from the requirements to register their overseas entities on the grounds of the economic wellbeing of the United Kingdom.
Lord Fox (LD)
My Lords, the arguments have all been made in the previous stage, when the Minister stood up and said that the Government were prepared to accept what was then Amendment 43; I was delighted. It is now Amendment 27, which I beg to move.
Lord Callanan (Con)
My Lords, I am happy to confirm and accept the amendment from the noble Lord, Lord Fox, also signed by the noble Lord, Lord Coaker, which was originally Amendment 43. It removes an exemption from reporting where this is in the interests of the economic well-being for the UK. As I said in Committee, I have listened carefully and we have engaged on this. In reflection of this and, as has been said, in the interests of working together to progress this vital legislation collaboratively and swiftly, the Government are happy to support this amendment.
Lord Callanan
“(ba) any required information about a trust delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts),”Member’s explanatory statement
This amendment means that the required information about trusts will be unavailable for inspection on the public register.
“(a) it relates to a registrable beneficial owner or managing officer in relation to an overseas entity,”Member’s explanatory statement
This amendment ensures that date of birth and residential address information is protected even if it relates to a person who has ceased to be a registrable beneficial owner.
(d) it is not information about a trust delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B).”Member’s explanatory statement
This amendment excludes information about trusts from the definition of “protected” date of birth and residential address information. This is because other amendments create different provisions governing the disclosure etc of information about trusts.
Lord Callanan
“Disclosure of information about trusts
(1) This section applies to information delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts).(2) The registrar may not disclose the information unless—(a) the same information is made available by the registrar for public inspection otherwise than by virtue of being delivered to the registrar by virtue of a provision mentioned in subsection (1), or(b) the disclosure is permitted by subsection (3).(3) The registrar may disclose the information to—(a) the Commissioners for Her Majesty’s Revenue and Customs, or(b) any other person who—(i) has functions of a public nature, and(ii) is specified for the purposes of this section by regulations made by the Secretary of State.(4) Regulations under this section are subject to the negative resolution procedure.”Member’s explanatory statement
This new clause generally prevents the registrar from disclosing the required information about trusts. But it also includes a new power to disclose information to HMRC or other specified persons with public functions.
Lord Callanan
Member’s explanatory statement
This amendment is consequential on the new clause about disclosure of information about trusts.
Lord Callanan
Member’s explanatory statement
This amendment removes the mental element for the offence under clause 31 and introduces a reasonable excuse defence instead (for example to cater for cases where an overseas entity reasonably relies on information provided by others which turns out to be untrue).
“(1A) An offence under this section is aggravated if, when the document or statement is delivered, the person knows that it is misleading, false or deceptive in a material particular.”Member’s explanatory statement
This amendment provides that an offence under clause 31 is aggravated if it is committed by a person who knew that the document or statement provided is misleading, false or deceptive in a material particular. A later amendment imposes a higher penalty for an aggravated offence.
“(1B) A person guilty of an offence under this section, other than an aggravated offence, is liable —(a) on summary conviction in England and Wales, to a fine;(b) on summary conviction in Scotland, to a fine not exceeding level 5 on the standard scale;(c) on summary conviction in Northern Ireland, to a fine not exceeding level 5 on the standard scale.”Member’s explanatory statement
This amendment provides for the penalty for an offence under clause 31 other than an aggravated offence.
Member’s explanatory statement
This amendment provides for the current penalty under clause 31 to apply only where the offence is an aggravated offence (because of the defendant’s knowledge).
Lord Callanan
“(5A) The Secretary of State must consult the Department of Finance in Northern Ireland before making regulations under subsection (4).”Member’s explanatory statement
This amendment requires the Secretary of State to consult a Northern Ireland department before making regulations under clause 32(4).
Lord Callanan
Member’s explanatory statement
This amendment and related amendments align the transitional periods under Schedule 3 with the period in new clause (Applications in the transitional period: information about land transactions).
Member’s explanatory statement
This amendment requires the Chief Land Registrar to act as soon as reasonably practicable, and in any event before the end of the transitional period, to enter a restriction in relation to an estate in land owned by an overseas entity since before the Bill comes into force.
Member’s explanatory statement
This amendment and related amendments align the transitional periods under Schedule 3 with the period in new clause (Applications in the transitional period: information about land transactions).
Member’s explanatory statement
This amendment changes the definition of “the commencement date” in Schedule 3 so that it is the same as the date from which the transitional period (as amended) would run.
““the transitional period” has the meaning given by section (Applications in the transitional period: information about land transactions)(10).”Member’s explanatory statement
This amendment defines “the transitional period” for the purposes of Part 2 of Schedule 3 to have the same meaning as in new clause (Applications in the transitional period: information about land transactions).
Lord Callanan
Member’s explanatory statement
This amendment ensures consistency with paragraph 7 of Schedule 4, which prohibits the delivery of a qualifying registrable deed in specified circumstances.
“(3) Sub-paragraph (2) does not apply where—(a) the application is made by a person other than the overseas entity referred to in sub-paragraph (1)(b)(i), and(b) the deed in respect of which the application is made is a lease or an assignation of a lease the subjects of which consist of or form part of an unregistered plot of land of which that overseas entity is the proprietor.”Member’s explanatory statement
This amendment provides an exception to the application of sub-paragraph (2) in circumstances where a third party makes an application to register a lease or an assignation of lease, which necessitates the registration of the overseas entity’s title as a result of automatic plot registration.
Member’s explanatory statement
This amendment clarifies the point in time at which the overseas entity’s interest must have been registered in order to fall within the scope of this provision.
“(ii) in respect of a transfer of ownership or other event that”Member’s explanatory statement
This amendment clarifies that the exception provided for at paragraph 2(2)(a) applies in circumstances where the application for registration is in respect of a transfer of ownership or other event that occurs by operation of law.
“(3) Sub-paragraph (2) does not apply where—(a) the application is made by a person other than the overseas entity referred to in sub-paragraph (1)(b)(i), and(b) the deed in respect of which title is being completed is a lease or an assignation of a lease the subjects of which consist of or form part of an unregistered plot of land of which that overseas entity is the proprietor.”Member’s explanatory statement
This amendment provides an exception to the application of sub-paragraph (2) where a third party makes an application to complete title in respect of a lease or an assignation of lease, which necessitates the registration of the overseas entity’s title as a result of automatic plot registration.
Member’s explanatory statement
This amendment clarifies the point in time at which the overseas entity’s interest must have been registered in order to fall within the scope of this provision.
“(ii) in respect of a transfer of ownership or other event that”Member’s explanatory statement
This amendment clarifies that the exception provided for at paragraph 4(2)(a) applies in circumstances where the application for registration is in respect of a transfer of ownership or other event that occurs by operation of law.
Member’s explanatory statement
This amendment extends the scope of paragraph 5 to include applications made by virtue of section 43(5) of the Land Registration etc.(Scotland) Act 2012, provided such applications meet the other criteria set out in paragraph 5(1).
(ii) that entry would be marked as provisional under section 44(1).”Member’s explanatory statement
This amendment narrows the scope of paragraph 5 to ensure that prescriptive claimants who are not overseas entities are not prevented from registering their prescriptive application where the existing title is held by an overseas entity.
“(a) an overseas entity is entered as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland, having been so entered during the pre-commencement period,”Member’s explanatory statement
This amendment is consequential on the amendment to clause 9(8)(b)(i) and clarifies that the entry has to have been made during the pre-commencement period.
“(a) an overseas entity is entered as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland, having been so entered during the pre-commencement period,”Member’s explanatory statement
This amendment is consequential on the amendment to clause 9(8)(b)(i) and clarifies that the entry has to have been made during the pre-commencement period.
Member’s explanatory statement
This amendment changes the definition of “the commencement date” in Schedule 4 so that it is the same as the date from which the transitional period (as amended) would run.
Member’s explanatory statement
This amendment is consequential on the amendment inserting a paragraph 12A into new schedule 1A to the Land Registration etc.(Scotland) Act 2012.
Member’s explanatory statement
This amendment aligns the transitional period under Part 2 of Schedule 4 with the period in new clause (Applications in the transitional period: information about land transactions).
“12A_ For the purposes of paragraphs 10(1)(a) and 11(1)(a)—(a) references to an overseas entity’s being entered as proprietor in the proprietorship section of a title sheet are references to the name of the entity being so entered, and(b) the date on which an overseas entity was entered as proprietor in the proprietorship section of a title sheet is, where the entry was made by virtue of an application for registration, the date of registration as determined under section 37 of the Land Registration etc. (Scotland) Act 2012 (date and time of registration).”Member’s explanatory statement
This amendment applies terminology used in the Land Registration etc.(Scotland) Act 2012 to paragraphs 10(1)(a) and 11(1)(a) of new schedule 1A to ensure consistency between the two legislative schemes.
Member’s explanatory statement
This amendment aligns the period mentioned in paragraph 13(2) of Schedule 4 with the transitional period in new clause (Applications in the transitional period: information about land transactions).
“(4A) The Secretary of State must consult the Scottish Ministers before making regulations under this paragraph that contain provision that would be within the legislative competence of the Scottish Parliament if contained in an Act of that Parliament.”Member’s explanatory statement
This amendment requires the Secretary of State to consult the Scottish Ministers before making regulations under paragraph 13 of Schedule 4 that contain provision within devolved legislative competence.
Lord Callanan
“Sharing of information by HMRC Sharing of information by HMRC
(1) The Commissioners for Her Majesty’s Revenue and Customs may disclose information to the Secretary of State or the registrar for the purpose of the taking of action in connection with an offence under this Part.(2) For the purposes of this section, the taking of action in connection with an offence under this Part includes any of the following—(a) investigating whether an offence has been committed;(b) prosecuting an offence;(c) imposing financial penalties for conduct amounting to an offence.(3) A person who receives information as a result of this section—(a) may not use the information other than for the purpose of the taking of action in connection with an offence under this Part;(b) may not further disclose the information unless the disclosure is necessary for the taking of action in connection with an offence under this Part.(4) It is an offence for a person to disclose, in contravention of subsection (3)(b), any revenue and customs information relating to a person whose identity—(a) is specified in the disclosure, or(b) can be deduced from it.(5) It is a defence for a person charged with an offence under subsection (4) to prove that the person reasonably believed—(a) that the disclosure was lawful, or(b) that the information had already lawfully been made available to the public.(6) Subsections (4) to (7) of section 19 of the Commissioners for Revenue and Customs Act 2005 apply to an offence under subsection (4) as they apply to an offence under that section.(7) In this section “revenue and customs information relating to a person” has the same meaning as in section 19 of the Commissioners for Revenue and Customs Act 2005 (see section 19(2) of that Act).”Member’s explanatory statement
This amendment permits HMRC to disclose information to allow the registrar and the Secretary of State to take action in connection with offences.
Lord Callanan
“Applications in the transitional period: information about land transactions
(1) This section applies where an overseas entity makes an application under section 4 for registration before the end of the transitional period.(2) If the entity has not made any relevant dispositions of land during the period—(a) beginning with 28 February 2022, and(b) ending with the making of the application,the application must include a statement to that effect.(3) If the entity has made any relevant dispositions of land during the period mentioned in subsection (2), the application must include—(a) the required information about each relevant disposition of land made during that period (see subsection (5)),(b) in relation to each such disposition, the statements and information mentioned in paragraphs (a), (b) and (c) of section 4(1) expressed by reference to the state of affairs immediately before the making of the disposition, and(c) a statement that all of the information required by paragraphs (a) and (b) of this subsection has been included in the application.(4) In this section “relevant disposition of land”, in relation to an overseas entity, means—(a) a registrable disposition of a qualifying estate within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 other than—(i) a disposition made in pursuance of a statutory obligation or court order, or occurring by operation of law, or(ii) a disposition made by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 3(3) of Schedule 4A to the Land Registration Act 2002, as inserted by Schedule 3 to this Act);(b) the delivery by the entity of a qualifying registrable deed granted by it where the entity’s interest in respect of which the deed was granted was registered in the Land Register of Scotland on or after 8 December 2014, unless the deed was granted—(i) in pursuance of a statutory obligation or court order, or(ii) by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 2(5) of schedule 1A of the Land Registration etc. (Scotland) Act 2012, as inserted by Schedule 4 to this Act).(5) The required information about a relevant disposition of land is—(a) where the relevant disposition of land is within subsection (4)(a)—(i) the date of disposition, and(ii) the registered title number of the qualifying estate;(b) where the relevant disposition of land is within subsection (4)(b)—(i) the date of delivery of the deed, and(ii) the title number of the title sheet in which the entity’s interest is entered.(6) In subsection (4)(a) “qualifying estate” means—(a) a freehold estate in land, or(b) a leasehold estate in land granted for a term of more than seven years from the date of grant,of which the overseas entity became a registered proprietor in pursuance of an application made on or after 1 January 1999.(7) In subsection (6) “registered proprietor”, in relation to an estate, means the person entered as proprietor of the estate in the register of title kept by the Chief Land Registrar.(8) In subsection (4)(b) “qualifying registrable deed” means a registrable deed (within the meaning of the Land Registration etc.(Scotland) Act 2012) which is—(a) a disposition,(b) a standard security,(c) a lease (including a sub-lease), or(d) an assignation of a lease (including a sub-lease).(9) For the purposes of subsection (4)(b), a qualifying registrable deed is to be treated, as at the date of delivery, as having been granted even if at that time it has been executed by the overseas entity only.(10) In this section “the transitional period” means the period of 6 months beginning with the day on which section 3(1) comes fully into force.”Member’s explanatory statement
This new clause requires an overseas entity, when making an application within the first 6 months of the commencement of clause 3(1), to provide additional information about relevant dispositions of land on or after 28 February 2022.
Lord Callanan
“Requirement for certain unregistered overseas entities to provide information
(1) An overseas entity, and every officer of the entity who is in default, commits an offence if—(a) at any time during the period beginning with 28 February 2022 and ending with the end of the transitional period, the entity has made a relevant disposition of land,(b) at the end of the transitional period the entity—(i) is not registered as an overseas entity,(ii) has not made an application for registration as an overseas entity that is pending, and(iii) is not an exempt overseas entity, and(c) the entity has not, after making the relevant disposition of land and before the end of the transitional period, delivered to the registrar—(i) statements and information of the kind mentioned in paragraphs (a), (b), (c) and (d) of section 4(1), expressed by reference to the state of affairs immediately before the making of the relevant disposition of land, and(ii) the required information about the relevant disposition of land (within the meaning of section (Applications in the transitional period: information about land transactions) (5)).(2) A person guilty of an offence under subsection (1) is liable on summary conviction—(a) in England and Wales to a fine and, for continued contravention, a daily default fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale;(b) in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one half of level 5 on the standard scale.(3) The contravention continues until such time as the overseas entity has delivered the statements and information mentioned in subsection (1)(c).(4) In the case of continued contravention, an offence is also committed by every officer of the overseas entity who did not commit an offence under subsection (1) in relation to the initial contravention but who is in default in relation to the continued contravention.(5) A person guilty of an offence under subsection (4) is liable on summary conviction—(a) in England and Wales, to a fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale for each day on which the contravention continues and the person is in default;(b) in Scotland or Northern Ireland, to a fine not exceeding one half of level 5 on the standard scale for each day on which the contravention continues and the person is in default.(6) In this section—“exempt overseas entity” means an entity of a description specified in regulations under section 33(6);“relevant disposition of land” has the meaning given by section (Applications in the transitional period: information about land transactions) (4);“transitional period” has the meaning given by section (Applications in the transitional period: information about land transactions) (10).”Member’s explanatory statement
This new clause makes it an offence for certain unregistered overseas entities to fail to provide information about relevant dispositions of land made on or after 28 February.
“Section (Requirement for certain unregistered overseas entities to provide information): supplementary
(1) Section 12 has effect as if—(a) subsection (1) included a reference to an overseas entity being under a duty to comply with that section before delivering statements and information under section (Requirement for certain unregistered overseas entities to provide information)(1)(c)(i);(b) subsection (2) included a reference to obtaining information for the purposes of section (Requirement for certain unregistered overseas entities to provide information)(1)(c)(i).(2) The Secretary of State may by regulations make further provision in connection with—(a) the provision of information under section (Requirement for certain unregistered overseas entities to provide information)(1)(c),(b) the verification of that information, or(c) the processing of that information by the registrar,including provision modifying any provision made by or under this Part or applying any provision made by or under this Part with modifications.(3) Regulations under this section are subject to the negative resolution procedure.”Member’s explanatory statement
This new clause makes further provision in connection with new clause (Requirement for certain unregistered overseas entities to provide information).
Lord Callanan
“(2) A reference in section 12 or 13 to a person who is a registrable beneficial owner of an overseas entity includes, in connection with the obtaining of information required by section 7(1)(b), 9(1)(c), (Applications in the transitional period: information about land transactions)(3)(b) or (Requirement for certain unregistered overseas entities to provide information)(1)(c)(i), a reference to a person who has ceased to be a registrable beneficial owner.(3) A reference in this Part to a trust includes arrangements, under the law of a country or territory outside the United Kingdom, that are of a similar character to a trust, and any related expressions are to be read accordingly.(4) The Secretary of State may by regulations make provision specifying descriptions of arrangements that are, or are not, to be treated as being of a similar character to a trust for the purposes of subsection (3).(5) Regulations under subsection (4) are subject to the negative resolution procedure.”Member’s explanatory statement
This amendment makes further interpretive provision, including provision extending the provisions of Part 1 of the Bill in relation to trusts so that they apply to arrangements of a similar character outside the UK.
Economic Crime (Transparency and Enforcement) Bill
Monday 14th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, it is my great pleasure to thank all those who have supported the progress of the Bill. First, I thank the House of Lords Public Bill Office, the House clerks and the Office of the Parliamentary Counsel for their support and extremely hard work in ensuring that the Bill could be expedited through the House. In particular, I thank our new star of social media, my noble friend Lady Bloomfield—we shall all have to be very careful and make sure that we are paying attention when she is in the House in future—and my noble friends Lady Williams and Lord Ahmad, who have ably assisted me in getting this cross-cutting legislation through the House.
I also give particular thanks to my private office and the whole of the Bill team in both BEIS and the Home Office. All the civil servants working there are a credit to their profession. I can tell the House that they were working evenings and weekends. People were texting me at 10 pm last night, on a Sunday evening, on the details—so they have really assisted us by working hard. That is in addition to all the officials across government, in BEIS, the Home Office, the Treasury and the Foreign, Commonwealth and Development Office, who have all contributed by working tirelessly to get the Bill to this point. I also want to remember the late Nick Skates, a dedicated civil servant who spent many years working on these issues, tackling economic crime, who is very sadly not with us today to see the fruits of his labour.
I also give particular tribute to the Opposition spokesmen, the noble Lords, Lord Coaker and Lord Fox, and all their colleagues—the noble Baroness, Lady Chapman, and others—for their constructive challenge and continued support for the Bill. I am grateful to Members across the House for their valuable engagement and contributions to our debates on the Bill; it has been immeasurably improved by the work that they have put in in such speedy and short order. I also thank them for the support that they have already expressed for the upcoming second economic crime Bill, which the Government will introduce in the coming months, in the next parliamentary Session. I also pay tribute to the Joint Committee on the Draft Registration of Overseas Entities Bill, which, a few years ago, helped ensure that this legislation was in a good place prior to its introduction.
I express my gratitude and thanks to the devolved Administrations in Wales and Scotland for their support for the Bill. We are delighted that a legislative consent Motion has been agreed with Scotland.
I also thank the Northern Ireland Executive’s Department of Justice, the Department for the Economy and the Department of Finance for their support. In the absence of the Northern Ireland Executive, a legislative consent Motion cannot be secured from the Northern Ireland Assembly. However, given the active support of Northern Ireland Ministers, the Government have agreed to proceed with legislating on behalf of Northern Ireland. Ministers in Northern Ireland have, of course, been made aware of this. Both my department and the Home Office will continue to engage with Northern Ireland executive officials on devolved matters as the Bill is implemented.
The Bill will target sources of illicit wealth and their permeation through our economy. We will cut off these funds. We will send a message that the United Kingdom will not stand idly by when this exploitation is taking place. We will show the Kremlin that the United Kingdom will not facilitate or accept any aspect of aggression against any democratic nation. We will do so united, cross party and working together to bring these matters to fruition. I commend the Bill to the House.
Lord Coaker (Lab)
I start by thanking various people—including my family, who put up with me being on the telephone most of the weekend, often to the Minister. It was worth it in the end, as they say.
On a serious note, I thank everyone. This is a fast-tracked Bill, and that puts pressure on everybody. It is important to thank people at this time; it is a courtesy of the House but an important one to thank the staff, the clerks, the officers of the House and everybody who has enabled us to function in the way that we have and to put this extremely important legislation through the House. We are passing legislation which impacts on millions of people’s lives in this country, across Europe and beyond, and in thanking each other for doing that, we all ought to reflect perhaps a little more than we sometimes do on the enormity of the work that we do and the responsibility that we have. The people we are thanking should realise that they have made things possible in the Parliament of the United Kingdom, and that is something to remind ourselves of.
I also thank my colleagues: my noble friend Lady Chapman—who as we know has had to give her apologies for personal reasons today, and we wish her well—my noble friends Lord Kennedy and Lady Smith, and Dan Stevens in our office, who has worked tirelessly to keep us informed about the importance of different parts of the legislation.
I also thank the noble Lord, Lord Fox, and his colleague the noble Baroness, Lady Kramer, and others, for the work that they have done with us; and the many noble Lords across the Cross Benches who have taken the trouble to send me information, talk to me and give me the benefit of their expertise and knowledge. I have been very grateful for that; I hope that it has improved the contributions that we have all made to the House and in the end will improve the legislation that we take forward.
I thank the Minister again, as I did earlier, and his colleagues on the Front Bench for the co-operation that they have given us. Obviously there have been debates and discussions, but we have all had at the forefront of our minds the need to get the legislation through, and this has been a template for how to do that. I ask him to pass that on to all his colleagues. This is something important for our country.
This economic crime Bill 1—as we are calling it—needs to be improved, but we should remind ourselves that the bit that needs improving is not the emergency part. We should remind ourselves that we have passed an emergency Bill that allows us to do what we all want: to take effective action against dirty money within London—perhaps it should have been done before, but at least we are doing it now—and send a message to President Putin that he cannot act with impunity on the invasion of Ukraine. We stand united to try to deal with that. On the sanctions part—the real emergency part of the Bill—we all remain united. The message should go out clearly from this House of Lords back to the House of Commons and from us to the people of Ukraine, and to Russia itself.
As the Minister said, we will be moving from this economic crime Bill to an economic crime Bill 2. I am very grateful for the concessions he made. He will know the disquiet in the House about certain measures in the existing Bill, but he said that he would take that on board and reflect on the opinions expressed. It will allow us to take forward economic crime Bill 2 early in the next Session and build on the work we have done by putting improvements into it. Looking at various Cross-Benchers and around the House, I know that we will end up with a big economic crime Bill 2, which in the end will deliver the sort of legislation we all want to tackle the dirty money in our country.
I thank everyone again. It has been a pleasure and a privilege to be involved with this and I thank the Minister again for that.
Lord Fox (LD)
My Lords, as the noble Lord, Lord Coaker, reminded us, this is an emergency Bill. Your Lordships’ House has expedited it swiftly. In that regard, we should be pleased with how much scrutiny we have been able to pack into such a short time. The fact that there were 62 government amendments and two other amendments on Report indicates that quite a lot of work has been done, not necessarily all by us. I commend everybody who has participated in this, on Opposition Benches and the Benches opposite, towards a process where—I hope—Ministers believe that this is a better Bill than the one we received.
Looking forward, much hope is vested in the subsequent Bill. It is clear that the Government should expect that, when it comes, the level of scrutiny will be much higher and normal service will be resumed in the amount of time we expect to be available to give a quality look at it. In the meantime, we await the statutory instruments needed to drive this Bill and look forward to the six-week review on how commencement is moving forward.
I join the noble Lord, Lord Coaker, in thanking the Ministers—the noble Baroness, Lady Williams, and the noble Lords, Lord Ahmad and Lord Callanan—and their various Whips who have been here at different times. I particularly commend the Bill team. It is quite clear they must have lost an awful lot of sleep and weekends to get where we did; now all they have are a couple of dozen statutory instruments to sort out—so no pressure. I thank them very much for their hard work and thank the private offices of the noble Lord, Lord Callanan, and others.
I also thank the Opposition Front Bench—the noble Lord, Lord Coaker, and the noble Baroness, Lady Chapman, and her able sub the noble Baroness, Lady Smith. Of course, I give particular props to the home team of my noble friends Lady Kramer, Lord Thomas and Lord Clement-Jones, and of course Sarah Pughe, our legislation adviser, without whom everything would be incoherent.
In sending the Bill back to the Commons, we should remember that it is not an anti-Russian Bill. It is an anti-oligarch Bill and an anti-kleptocrat Bill. Of course, some of those criminals come from Russia. We should also turn the fire of this legislation on kleptocrats from Belarus and other such places and, in due course, on criminals from all around the world. This is against not the people of Russia but the criminals who have robbed the people of Russia, and we should remind ourselves of that. We look forward to the next phases of legislation in this area.
Royal Assent
Monday 14th March 2022
(2 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)
Lord Ashton of Hyde (Con)
My Lords, in begging to move that the House do now adjourn, I say a big thank you on our behalf to all the staff of the House for remaining so late.
Economic Crime (Transparency and Enforcement) Bill
Monday 14th March 2022
(2 years, 8 months ago)
Commons ChamberRead Full debate Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)
Madam Deputy Speaker (Dame Rosie Winterton)
Under the Order of the House of 7 March, proceedings on Lords amendments to the Economic Crime (Transparency and Enforcement) Bill may be entered upon and proceeded with at any hour and must be brought to a conclusion one hour after their commencement. Financial privilege is not engaged by any of the Lords amendments.
Lords amendment 1 agreed to.
Lords amendments 2 to 64 agreed to.
Madam Deputy Speaker
Under the Order of the House of today, I may not adjourn the House until I have notified the Royal Assent to any Act relating to the Economic Crime (Transparency and Enforcement) Bill, agreed upon by both Houses. We will proceed with the Adjournment debate for no more than 30 minutes. If Royal Assent has not arrived by the end of the Adjournment debate, the sitting will be suspended.