All 6 contributions to the Economic Crime (Transparency and Enforcement) Act 2022 (Ministerial Extracts Only)

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Mon 7th Mar 2022
Mon 7th Mar 2022
Economic Crime (Transparency and Enforcement) Bill
Commons Chamber

Committee stage: Committee of the whole House & Committee stage
Wed 9th Mar 2022
Mon 14th Mar 2022
Mon 14th Mar 2022
Mon 14th Mar 2022

Economic Crime (Transparency and Enforcement) Bill

(Limited Text - Ministerial Extracts only)

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This text is a record of ministerial contributions to a debate held as part of the Economic Crime (Transparency and Enforcement) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Priti Patel Portrait The Secretary of State for the Home Department (Priti Patel)
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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 Portrait Joanna Cherry (Edinburgh South West) (SNP)
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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 Portrait Priti Patel
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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 Portrait Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
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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?

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Priti Patel Portrait Priti Patel
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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 Portrait Jim Shannon (Strangford) (DUP)
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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 Portrait Priti Patel
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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 Portrait John Redwood (Wokingham) (Con)
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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 Portrait Priti Patel
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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.

Barry Sheerman Portrait Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
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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?

Robert Goodwill Portrait Sir Robert Goodwill (Scarborough and Whitby) (Con)
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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 Portrait Priti Patel
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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.

Roger Gale Portrait Sir Roger Gale (North Thanet) (Con)
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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 Portrait Priti Patel
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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.

Munira Wilson Portrait Munira Wilson (Twickenham) (LD)
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Will the Secretary of State give way?

Priti Patel Portrait Priti Patel
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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.]

Lindsay Hoyle Portrait Mr Speaker
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Order. There are just too many conversations going on. I am struggling to hear.

Priti Patel Portrait Priti Patel
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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 Portrait Bob Seely (Isle of Wight) (Con)
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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 Portrait Priti Patel
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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 Portrait Aaron Bell (Newcastle-under-Lyme) (Con)
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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 Portrait Priti Patel
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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 Portrait Andy McDonald (Middlesbrough) (Lab)
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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 Portrait Priti Patel
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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.

Jonathan Djanogly Portrait Mr Jonathan Djanogly (Huntingdon) (Con)
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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?

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Priti Patel Portrait Priti Patel
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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.

David Davis Portrait Mr David Davis (Haltemprice and Howden) (Con)
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Will my right hon. Friend give way?

Priti Patel Portrait Priti Patel
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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.

Kevan Jones Portrait Mr Kevan Jones (North Durham) (Lab)
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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 Portrait Priti Patel
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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.

John Baron Portrait Mr John Baron (Basildon and Billericay) (Con)
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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 Portrait Priti Patel
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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.

Iain Duncan Smith Portrait Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
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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 Portrait Priti Patel
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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.

David Davis Portrait Mr David Davis
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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 Portrait Priti Patel
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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 Portrait Matt Hancock (West Suffolk) (Con)
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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 Portrait Priti Patel
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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.

Margaret Hodge Portrait Dame Margaret Hodge (Barking) (Lab)
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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 Portrait Priti Patel
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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 Portrait Catherine West (Hornsey and Wood Green) (Lab)
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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 Portrait Priti Patel
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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 Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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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 Portrait Priti Patel
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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 Portrait Layla Moran (Oxford West and Abingdon) (LD)
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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 Portrait Priti Patel
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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 Portrait Chris Bryant (Rhondda) (Lab)
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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 Portrait Priti Patel
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The hon. Gentleman has clearly been occupied elsewhere, and we did cover this point earlier on.

Andrea Leadsom Portrait Dame Andrea Leadsom (South Northamptonshire) (Con)
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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 Portrait Priti Patel
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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 Portrait Andy Slaughter (Hammersmith) (Lab)
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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 Portrait Priti Patel
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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 Portrait Tim Loughton (East Worthing and Shoreham) (Con)
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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 Portrait Priti Patel
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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.

Oliver Heald Portrait Sir Oliver Heald (North East Hertfordshire) (Con)
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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 Portrait Priti Patel
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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.

None Portrait Several hon. Members rose—
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Priti Patel Portrait Priti Patel
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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.

Stewart Hosie Portrait Stewart Hosie (Dundee East) (SNP)
- Hansard - - - Excerpts

Will the Secretary of State give way?

Priti Patel Portrait Priti Patel
- Hansard - - - Excerpts

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 Portrait Craig Mackinlay (South Thanet) (Con)
- Hansard - - - Excerpts

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.

--- Later in debate ---
Priti Patel Portrait Priti Patel
- Hansard - - - Excerpts

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 Portrait Matt Western (Warwick and Leamington) (Lab)
- View Speech - Hansard - - - Excerpts

Will the Secretary of State give way?

Priti Patel Portrait Priti Patel
- Hansard - - - Excerpts

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.

--- Later in debate ---
Yvette Cooper Portrait Yvette Cooper
- Hansard - - - Excerpts

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.

Yvette Cooper Portrait Yvette Cooper
- Hansard - - - Excerpts

I will give way to the Home Secretary to clarify.

Priti Patel Portrait Priti Patel
- Hansard - - - Excerpts

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.

--- Later in debate ---
Yvette Cooper Portrait Yvette Cooper
- Hansard - - - Excerpts

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 Portrait Priti Patel
- Hansard - - - Excerpts

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.

Lindsay Hoyle Portrait Mr Speaker
- Hansard - - - Excerpts

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.

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Paul Scully Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
- View Speech - Hansard - - - Excerpts

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.

John Baron Portrait Mr Baron
- Hansard - - - Excerpts

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 Portrait Paul Scully
- View Speech - Hansard - - - Excerpts

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.

Angela Eagle Portrait Dame Angela Eagle
- Hansard - - - Excerpts

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 Portrait Paul Scully
- View Speech - Hansard - - - Excerpts

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 Portrait Peter Dowd
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Matt Hancock
- View Speech - Hansard - - - Excerpts

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.

--- Later in debate ---
Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Kevin Hollinrake
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

None Portrait Several hon. Members rose—
- Hansard -

Paul Scully Portrait Paul Scully
- View Speech - Hansard - - - Excerpts

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.

Margaret Hodge Portrait Dame Margaret Hodge
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Layla Moran
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

I will give way one last time.

Gavin Robinson Portrait Gavin Robinson
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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

(Limited Text - Ministerial Extracts only)

Read Full debate
Committee stage
Monday 7th March 2022

(2 years, 2 months ago)

Commons Chamber
Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Amendment Paper: Committee of the whole House Amendments as at 7 March 2022 - (7 Mar 2022)

This text is a record of ministerial contributions to a debate held as part of the Economic Crime (Transparency and Enforcement) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Paul Scully Portrait The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
- Hansard - - - Excerpts

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 Portrait Chris Bryant (Rhondda) (Lab)
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

Angela Eagle Portrait Dame Angela Eagle (Wallasey) (Lab)
- Hansard - - - Excerpts

Will the Minister give way?

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

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.

Angela Eagle Portrait Dame Angela Eagle
- Hansard - - - Excerpts

Will the Minister give way?

Stewart Hosie Portrait Stewart Hosie (Dundee East) (SNP)
- Hansard - - - Excerpts

Will the Minister give way?

Stewart Hosie Portrait Stewart Hosie
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

Angela Eagle Portrait Dame Angela Eagle
- Hansard - - - Excerpts

Will the Minister give way?

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

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.

Angela Eagle Portrait Dame Angela Eagle
- Hansard - - - Excerpts

Will the Minister give way?

Paul Scully Portrait Paul Scully
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I will—the hon. Lady has been trying so hard.

Angela Eagle Portrait Dame Angela Eagle
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Sammy Wilson (East Antrim) (DUP)
- Hansard - - - Excerpts

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.

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Paul Scully Portrait Paul Scully
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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.

Iain Duncan Smith Portrait Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

David Davis Portrait Mr David Davis (Haltemprice and Howden) (Con)
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Liam Byrne (Birmingham, Hodge Hill) (Lab)
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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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Sammy Wilson
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Sammy Wilson
- Hansard - - - Excerpts

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 Portrait Paul Scully
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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 Portrait Seema Malhotra (Feltham and Heston) (Lab/Co-op)
- View Speech - Hansard - - - Excerpts

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.

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Iain Duncan Smith Portrait Sir Iain Duncan Smith
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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.

Iain Duncan Smith Portrait Sir Iain Duncan Smith
- Hansard - - - Excerpts

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.

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

indicated assent.

Iain Duncan Smith Portrait Sir Iain Duncan Smith
- Hansard - - - Excerpts

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.

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Kevin Hollinrake Portrait Kevin Hollinrake
- Hansard - - - Excerpts

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.

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

indicated assent.

Kevin Hollinrake Portrait Kevin Hollinrake
- Hansard - - - Excerpts

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.

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Kim Johnson Portrait Kim Johnson (Liverpool, Riverside) (Lab)
- Hansard - - - Excerpts

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 Portrait Paul Scully
- Hansard - - - Excerpts

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 Portrait Chris Bryant
- Hansard - - - Excerpts

The more we can present a united front—particularly tomorrow—the better, so I will of course not press the amendment.

Paul Scully Portrait Paul Scully
- Hansard - - - Excerpts

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.

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21:38

Division 206

Ayes: 229


Labour: 165
Scottish National Party: 36
Liberal Democrat: 10
Democratic Unionist Party: 6
Conservative: 4
Independent: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 1
Alliance: 1
Alba Party: 1
Green Party: 1

Noes: 303


Conservative: 302
Independent: 1

New Clause 7
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21:54

Division 207

Ayes: 225


Labour: 163
Scottish National Party: 35
Liberal Democrat: 10
Democratic Unionist Party: 6
Independent: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 1
Alliance: 1
Alba Party: 1
Green Party: 1

Noes: 306


Conservative: 301
Independent: 1

New Clause 29
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22:08

Division 208

Ayes: 234


Labour: 164
Scottish National Party: 36
Liberal Democrat: 10
Conservative: 9
Democratic Unionist Party: 6
Independent: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 1
Alliance: 1
Alba Party: 1
Green Party: 1

Noes: 300


Conservative: 296
Independent: 1

Schedules 1 and 2 agreed to.

Economic Crime (Transparency and Enforcement) Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
2nd reading
Wednesday 9th March 2022

(2 years, 2 months ago)

Lords Chamber
Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Amendment Paper: HL Bill 126 Running list of amendments - (9 Mar 2022)

This text is a record of ministerial contributions to a debate held as part of the Economic Crime (Transparency and Enforcement) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Moved by
Baroness Williams of Trafford Portrait Baroness Williams of Trafford
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That the Bill be now read a second time.

Baroness Williams of Trafford Portrait The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
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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.

--- Later in debate ---
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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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 Eatwell Portrait Lord Eatwell (Lab)
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Will the Minister give way?

Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Eatwell (Lab)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Fox (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Baroness Kramer (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Clement-Jones (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Vaux of Harrowden (CB)
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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 Portrait Lord Callanan (Con)
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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 Portrait Viscount Waverley (CB)
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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 Portrait Lord Callanan (Con)
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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.

Bill read a second time and committed to a Committee of the Whole House.

Economic Crime (Transparency and Enforcement) Bill

(Limited Text - Ministerial Extracts only)

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Committee stage
Monday 14th March 2022

(2 years, 2 months ago)

Lords Chamber
Economic Crime (Transparency and Enforcement) Act 2022 Read Hansard Text Amendment Paper: HL Bill 126-R-I Marshalled list for Report - (14 Mar 2022)

This text is a record of ministerial contributions to a debate held as part of the Economic Crime (Transparency and Enforcement) Act 2022 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Moved by
1: Clause 4, page 2, line 19, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
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).
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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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.

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Lord Cormack Portrait Lord Cormack (Con)
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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 Portrait Lord Callanan (Con)
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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.

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Lord Clement-Jones Portrait Lord Clement-Jones (LD)
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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 Portrait Lord Callanan (Con)
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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.

Amendment 1 withdrawn.
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Lord Coaker Portrait Lord Coaker (Lab)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Eatwell (Lab)
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Just thinking off the top of my head, I can think of four registers of this ilk which exist already.

Lord Callanan Portrait Lord Callanan (Con)
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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.

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Lord Sikka Portrait Lord Sikka (Lab)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Burnett (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Cromwell (CB)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Vaux of Harrowden (CB)
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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 Portrait Lord Callanan (Con)
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No, I do not disagree with that. It is, of course, perfectly possible—

Lord Eatwell Portrait Lord Eatwell (Lab)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Cromwell (CB)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Clement-Jones (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Fox (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Clement-Jones (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Cormack (Con)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Vaux of Harrowden (CB)
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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 Portrait Lord Callanan (Con)
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Yes, I am happy to meet with the noble Lord and his colleagues to discuss that matter.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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I beg leave to withdraw the amendment.

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Moved by
33: Clause 9, page 7, line 23, leave out sub-paragraph (i) and insert—
“(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 Portrait Lord Callanan (Con)
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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 Portrait Lord Sikka (Lab)
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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.

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Lord Fox Portrait Lord Fox (LD)
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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 Portrait Lord Callanan (Con)
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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.

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Lord Faulks Portrait Lord Faulks (Non-Afl)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Fox (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Fox (LD)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Faulks (Non-Afl)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Sentamu (CB)
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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.