Corruption
Lord Rooker
To ask Her Majesty’s Government what assessment they have made of the level of corruption in the United Kingdom in the light of the recent report of Transparency International UK, Corruption on your Doorstep—How corrupt capital is used to buy property in the UK.
Lord Rooker (Lab)
My Lords, I want to seek the Government’s view on the contents of the report entitled, Corruption on your Doorstep—How corrupt capital is being used to buy property in the UK, published by Transparency International UK in mid-March. This quite remarkable report analysed data from the entire corporate holdings of property in England and Wales at the Land Registry and matched them with the files of the Metropolitan Police’s Proceeds of Corruption Unit. It found that 75% of properties under criminal investigation use offshore corporate “secrecy jurisdictions”. This is where the legal system has a deliberate veil of secrecy that obscures the identity of those arranging corporate structures.
More than £180 million-worth of property in the UK has been brought under criminal investigation as the suspected proceeds of crime since 2004. This is believed to be the tip of the iceberg. Some 40,725 London property titles are held by foreign companies, and they occupy, by the way, 70 million square feet, which is two and a half square miles. Moreover, 89.2% of these are incorporated in a secrecy jurisdiction—some 36,342 properties. Of these, 38% were registered in the Virgin Islands and 16% in Jersey. In 2011 alone, £3.8 billion-worth of UK property was bought by British Virgin Islands-registered companies.
It is crystal clear that UK Crown dependencies and British Overseas Territories are the preferred option for concealment for those under investigation. Indeed, by cross-checking the files, the report makes it clear that 100% of overseas trusts and companies that hold titles for UK property under investigation for grand corruption are registered in offshore financial jurisdictions, rather than in major economies. In three London boroughs, an astonishing number of properties are owned by companies in an offshore secrecy jurisdiction. In Westminster, the figure is 9.3%; in Kensington and Chelsea it is 7.3%; and in the City of London it is 4.5%.
The Prime Minister, to his credit, has done more than his predecessors in trying to get to grips with international money laundering. His moral compass is working somewhat better than others’ in this respect. He requested in 2014 that all British Overseas Territories make changes so there is public transparency regarding who owns companies and trusts. None has taken up the request to do this. Two considered it and then said no. We therefore need unilateral action to address the risks posed to the UK.
UK property is a safe haven in an unstable world, but it should not be a safe haven for corrupt capital stolen from around the world, much of it from poor countries, helped by laws that allow UK property to be owned by secret offshore companies. For example, it has been estimated that more than $1 trillion has been taken out of developing countries—poor countries—through a web of corrupt activities, adding to global poverty. The Transparency International report made 10 recommendations, four to the Government direct, four to HMRC and two to the Land Registry. I would like a response to all these in due course, but today I will highlight just four. The first is indeed the key recommendation in the report: that, before completing a purchase on a property, overseas companies should be required to submit to the Land Registry the same details that UK-registered companies must submit to Companies House. This will establish transparency regarding who owns the companies that, in turn, own so much property in the UK.
The second recommendation is that estate agents’ anti-money laundering responsibility should be extended to include due diligence checks on the purchaser, not just the seller. At present, the legal responsibility on estate agents is only to check one side of a property transaction. Of course, in theory purchasers should have been checked by their own legal representatives. However, under Section 330 of the Proceeds of Crime Act 2002, such representatives and advisers do not commit an offence if they fail to report suspicious activities that they learned about in “privileged circumstances”. Of course, many court cases have extended the area of privileged activities. In the last decade there has been an 82% fall in suspicious activity reports from solicitors. This just shows the scale of the problem. I understand the reason for Section 330 but let us require the estate agents to vet both sides. That is the easy and practical solution.
Thirdly, there should be greater co-ordination between the 27 anti-money laundering supervisors in the UK. Some of these have responsibility for parties involved in money laundering through property and the suggestion is that the Treasury should regularly convene a property working group for all the anti-money laundering supervisors with responsibility for property transactions.
I had a brief discussion with Transparency International and these are the three top issues from its report to highlight today. There is a fourth. The Government should consider introducing unexplained wealth orders—UWOs—and explore the feasibility of using this mechanism in the UK. It was not in the original report but Transparency International launched a discussion paper on unexplained wealth orders on 10 June and it was extensively covered in, for example, the Financial Times. Suffice to say, there were 354,186 suspicious activity reports filed in 2014 with the National Crime Agency. These led to 14,155 consent requests effectively to cover the backsides of the companies involved so that if they got caught out later they could say they had consent. Of these, 94 went to the Proceeds of Corruption Unit and only seven got refused.
If we had unexplained wealth orders, failure to respond to such an order or an inadequate response could then be used along with the initial grounds of suspicion in a recovery process against the asset by our law enforcement authorities. It is a serious issue because the director general of the National Crime Agency said in January that,
“the scale of money laundering is a strategic threat to the UK”.
It is clear that the prevalence of UK property holding by companies incorporated in secrecy jurisdictions is a major barrier to law enforcement. Of course, the percentage of properties purchased with illicit money is tiny compared to the market, but the values are huge. The £180 million I mentioned earlier referred to just 120 properties. We are talking about prime London property, not the mainstream property bought by those working here from overseas.
Further, our law enforcement agencies are not helped by the fact that the Land Registry does not record the value of all sales. That is a massive loophole that should be closed pdq. According to KPMG, the United Kingdom attracts the highest foreign investment volumes in European markets. In the first half of 2014 it was £24 billion, ahead of Germany at £16 billion. This is big money. Added to this, the UK has 250 foreign banks—more than any other country in the world. International investment into prime London was more than £7 billion in 2012. Savills’ 2013 report stated that 90% of new-build luxury properties were bought by overseas buyers. After the 2013 G8 summit—where the Prime Minister made his commitments, by the way—the UK was the first national jurisdiction to put forward legislation to enable a public registry of beneficial ownership. The Prime Minister was trying to deliver it via the Small Business, Enterprise and Employment Act—but even that is being got around. While I was searching the files and reading the papers I saw a report in the Financial Times on 6 June headlined “Transparency rules leave loophole, law firm claims”. The first paragraph read:
“A leading law firm has told wealthy clients they can avoid ‘unwanted public scrutiny’ from the new transparency laws, in a sign of widely criticised loopholes in the legislation championed by David Cameron”.
So there is work to be done in this area. I want to know, as do Transparency International and its supporters, what the Government are going to do. They have moved incredibly well, as I have said. I have paid tribute to the work of the Prime Minister, but the Transparency International report quotes extensively from key, named UK law enforcement officers about the problems that they have in this area. It seems to me that accepting their modest, considered recommendations would be giving our own law enforcement people the tools to do the job. I look forward to hearing the Minister’s response in due course.
Lord Graham of Edmonton (Lab)
My Lords, I first congratulate my colleague for his initiative in bringing to our attention aspects which I think deserve to be better treated. I ask you to switch your minds to the other end of the spectrum: from talking about houses that have been built deliberately and sell for many millions of pounds to the right-to-buy sector at the other end of the housing market. It was during the period when I was the Member of Parliament for Edmonton—now 40 years ago—that the idea of selling council houses to tenants emerged. I have no objection to that. The argument then was that people had been there for many years, their families were bedded in and they wanted to live there. That coincided with the then Government’s property-owning democracy, which is what they were telling people it was all about.
In my time in Edmonton, by the time things were sorted out you were offered the occupation and ownership of your house for perhaps £5,000 or £6,000. You had to keep it for five years but then you had the right to sell it, and many people did. The nexus that I want the House to record is what happened after that. The right to sell your own house is certainly, in the year of Magna Carta, a right you are entitled to have. But then what happens to the housing situation? People who were proud and grateful to have a house built by direct labour in Edmonton suddenly found that the house they looked forward to leaving to their children was no longer there because it had been sold. When it was sold it was sold and sold again. A house costing less than £10,000 in the early 1980s is now on the market for many hundreds of thousands of pounds, as are flats. You might say this is marvellous, and along the chain, the people who bought and sold made money. My direct question to the Government is: do they have a mechanism to trace what happens to the properties after they are sold?
A couple who operate in the Ashford area own 1,000 homes, which they rent out. The argument is that there are people who need housing and the people that they house, in the main, are immigrants, families who have difficulty getting on to a housing list and so on. They not only have in their portfolio 1,000 units, but they are preparing their portfolio for sale. In an article that I read—a copy of which I am glad to give to the Minister—they say they have already decided to sell their portfolio, and they have had estimates of £100 million for their property.
I simply say to the Minister that he and his colleagues should think very hard about the fact that these houses were built in order to accommodate poor people who were living in dreadful, overcrowded conditions. Twice in my time as the Member of Parliament for Edmonton, I left my surgery, sat in my car and cried because of the conditions—twice in 10 years. A home, a house, which you can call your own is priceless in that situation.
We need to understand that people are ruthless in lining their own pockets. It is now 30 years since I was the Member of Parliament for Edmonton, and in my time evidence was already growing in the Tottenham, Enfield and Southgate area that what I would call villains were at large and causing mayhem among people who were desperate. The Government should at least be able to tell me that they are monitoring the situation. At one time, there might have been one or two people with a portfolio of 10 or 12 houses, which they were entitled to, but the man from the couple I referred to earlier—I will not give a name—says that if tenants have more than two children, if they are on a zero-hours contract, if granny moves in or if they are on housing benefit and at risk of not paying the rent, then they are going to evict them. Here you have a situation where people are evicted, under the law, from their home, for which they paid rent. We are not talking about a few pounds’ rent: some people pay £200 a week and are assisted by all sorts of government agencies.
One end of this is now being looked at very closely thanks to my noble friend Lord Rooker—Jeff—and then there is the other end of it. One can ask what Labour did in the 13 years that we were in a position to do something about it. I am afraid that housing in this country is in a mess and has been for a very long time. If the Minister wants to make a name for himself, he ought to be telling me and other noble Lords that there is a solution. There is no solution, because it is so difficult, but I wanted to put on record the fact that housing is the greatest single cause of unhappiness in our communities. I rest my case.
Baroness Stern (CB)
My Lords, it is always a pleasure to follow the noble Lord, Lord Graham of Edmonton, who brings a wealth of experience from a lifetime trying to better the conditions of disadvantaged people in this country. I also thank the noble Lord, Lord Rooker, for initiating this very worthwhile debate and for introducing it so effectively.
In my view, corruption is one of the most damaging of the many current ills of the world. I come to this from what I know about the other end of events—those events that lead to corrupt money being used to buy luxury homes in London. I am thinking of a country I know where the people are very poor, and where in the winter, when it gets very cold, they have electricity for just five hours a day, if they are lucky. I am thinking of the woman who opens a little shop to sell embroidered products, and she discovers that 25% of what she makes has to go to someone connected to the President’s family, otherwise—although she is not doing anything wrong—her shop will be closed by the tax authorities.
I was very privileged to be at the founding meeting of the All-Party Parliamentary Group on Anti-Corruption in 2011, when John Githongo from Kenya spoke about his experiences from 2002 to 2005 as the Permanent Secretary for Governance and Ethics in the Kibaki Government. He explained why he eventually resigned, death threats being one reason; they were presumed to have come from those whose corruption was in danger of being uncovered by his office. Eventually he had to leave his country in a great hurry. He had a very powerful impact on his audience and on me, and subsequently I was privileged to become an officer of that APPG.
This debate provides a very welcome opportunity to thank Transparency International for this excellent report, which was so ably introduced by the noble Lord, Lord Rooker. It also provides an opportunity to show appreciation of the excellent organisations that highlight corruption, particularly Global Witness. Last year, the all-party group organised a visit for Members to the City of London Corporation and the City of London Police, and then a tour around the banks in the City led by Stuart McWilliam from Global Witness. We gathered at the entrance of a number of the big banks, one after the other, and he listed for us all the on-the-record actions of each bank that had assisted corruption in other parts of the world. It was an eye-opener.
Central Asia is a part of the world I know quite well, and one sees there all the time the effect of corruption on the people and their everyday lives. That brings me to the core issue of the Transparency International report: houses bought with laundered money, corruptly obtained. Kyrgyzstan became an independent country in 1991. I was very lucky to be there at the second anniversary of that independence, and I remember well the atmosphere of hope and excitement, and the huge enthusiasm for being able to live in a different way. It is therefore very sad to read that their democracy has not had an easy path, and corruption has become a large problem for them.
The case of Maxim Bakiyev, the son of the former Kyrgyz President Kurmanbek Bakiyev, is an illustration. Maxim Bakiyev came to the UK when his father was ousted from government by a popular uprising against the corruption practised by the Government. According to Global Witness in its report, Blood Red Carpet, Maxim Bakiyev arrived in a private jet in June 2010, and in August he took up residence in a new luxury property in Surrey, bought for £3.5 million by a company registered in Belize called Limium Partners Limited. At that time he was apparently under an Interpol red notice because of his role in the corruption case going through the courts in Kyrgyzstan. Apparently he has been living here ever since. Belize is one of the secrecy jurisdictions referred to in Transparency International’s report, so we do not know for sure who, ultimately, owns the company Limium, but Global Witness claims that the evidence that Bakiyev is the beneficial owner is overwhelming and it is highly probable that the money with which the house was bought is linked to the large amounts that left Kyrgyzstan corruptly during the Bakiyev years.
The case of Maxim Bakiyev’s house in Surrey has been exposed. This happens rarely. We know about the Hampstead home of James Ibori, a former state governor from Nigeria, and about Saif Gaddafi’s property, also in Hampstead, which was recovered by the Libyan Transitional Government. We know that 80% of the 76 homes sold in 1 Hyde Park were bought through anonymous companies registered in tax havens. The director of operations of the Metropolitan Police Proceeds of Corruption Unit has said:
“Properties that are purchased with illicit money, which is often stolen from some of the poorest people in the world, are nearly always layered through offshore structures”.
The UK is 14th in Transparency International’s corruption perception index. That is quite high—although we should note that there are 13 countries better than us—but we have to ask ourselves how far what we do in this country adds to the corruption in other countries. The Prime Minister said at the recent G7 meeting:
“Corruption is the cancer at the heart of so many of the problems we face around the world today. … Our efforts to address global poverty are too often undermined by corrupt governments preventing people getting the revenues and benefits of growth that are rightfully theirs”.
Corruption is also a contributor to the disillusion with politics that we now see; a disillusion that can have dangerous consequences. John Githongo, the Kenyan campaigner, talking recently in South Africa, said that it is decades of corruption in Kenya that has prevented Kenya establishing an effective security sector, thus leaving it vulnerable to terrorist attacks. We in this country should be doing everything we can to prevent corruption. We should be making it much more difficult for London to become the place of choice for those with ill-gotten gains to invest, or to come and live in houses bought with ill-gotten gains. As the noble Lord, Lord Rooker, has said, we should therefore look very carefully at the thoughtful and detailed recommendations set out in the Transparency International report. I endorse his welcome for what the Government have already done and I hope we shall hear from the Minister that they will do more.
Finally, it is most welcome that DfID funds the Metropolitan Police Proceeds of Corruption Unit, which is shortly to be incorporated into the National Crime Agency. I understand that there are concerns about that. Can the Minister offer reassurance that the reformed Proceeds of Corruption Unit will have enough investigators to pursue corruption cases adequately?
Lord Watson of Invergowrie (Lab)
My Lords, I declare an interest as a member of the All-Party Parliamentary Group on Anti-Corruption. We have two debts today that I would like to refer to. One is to Transparency International UK for compiling the report that is the basis of today’s debate, and the second is to my noble friend Lord Rooker for enabling it to have this airing.
I begin with a quotation:
“Corruption is the cancer at the heart of so many of the problems we face around the world today. … Our efforts to address global poverty are too often undermined by corrupt governments preventing people getting the revenues and benefits of growth that are rightfully theirs. Corruption undermines the wider global economy too. Cutting corruption by just 10% could benefit the global economy by $380 billion every year—substantially more than was estimated for the Doha Trade Round”.
Those words were taken from a blog that appeared in the name of David Cameron in the Huffington Post on 6 June. The Prime Minister, whose record of speaking out on this issue I have praised before and whose determination to make meaningful progress in tackling corruption I do not doubt, followed up by highlighting corruption in his speech to the G7 summit in Germany, calling for world leaders to take corruption more seriously, particularly in the wake of the FIFA scandal.
Corruption is a major contributor to global poverty. The opaque way in which companies are structured is more often than not at the heart of how illicit flows of capital are facilitated, either through tax evasion, money laundering or outright corruption. The cost to developing countries of this behaviour is quite staggering. It has been estimated that they may lose as much as $150 billion annually in tax revenue, a figure greater than the entire global aid budget. A World Bank review of 200 big corruption cases from 1980 to 2010 found that more than 70% relied on anonymous shell entities. Company service providers registered in the UK and its Crown dependencies and overseas territories were, to our shame, second on the list in providing these shell entities. The European Commission estimates a cost to EU member states of around €120 billion each year—that figure has some resonance this week because, as talks continue in Brussels to resolve the Greek debt crisis, it is pretty close to what the Greek Government are seeking in debt write-off in return for an agreement on whether their country remains within the euro.
In the UK, the Financial Services Authority estimated two years ago that more than £50 billion was being laundered within and through the UK every year. This figure, allied to the statistics contained in the TI report, illustrates that the Prime Minister needs to focus some of his attention on tackling corruption closer to home. As we have already heard, there is growing evidence that the UK property market has become a safe haven for corrupt money stolen from around the world, facilitated by laws that allow UK property to be owned by the secret offshore companies to which I referred. The Government need to act quickly to interrupt these flows of money and bring to an end the UK’s growing—and surely unwanted—status as the destination of choice for global corruption.
As mentioned by my noble friend Lord Rooker, some relatively simple measures could be taken, such as the Land Registry requiring transparency over who owns companies that own so much UK property. Estate agents’ anti-money laundering responsibility could be extended to include due diligence checks, ensuring that the purchasing company has declared its beneficial owners and that appropriate checks have been carried out on those individuals. I have no doubt that there would be resource issues should such measures be implemented and that estate agents would be keen to hear what the Government had to say about that, but I believe that the Government should be willing to underwrite any additional costs and see them as an investment for greater long-term gain in terms of the country’s reputation.
Another recommendation also mentioned by my noble friend Lord Rooker that I believe ought to be considered concerns the introduction of unexplained wealth orders. I find it difficult to understand why there is no power in UK law to require owners of unexplained wealth involved in a suspicious transaction to prove that the source is legitimate. Such legislation would require the owner of unexplained wealth to prove its legitimacy when a questionable transaction was identified. Failure either to respond to such an order or to provide an adequate response, together with the initial grounds for suspicion, could then be used to facilitate a civil recovery process against the asset. If the Minister does not believe that this would assist in the Prime Minister’s clear aim of challenging corruption, I would be interested to hear why. The scale of the problem of corruption and the breadth of the deficiencies in the current anti-money laundering system demand serious consideration of alternatives.
Finally, the Government must demand that the overseas territories and Crown dependencies adopt public registers of the true owners of companies registered in their jurisdictions. This needs to be done as a matter of urgency. I was dismayed to read the response of the Minister earlier this week to a Question from the noble Lord, Lord Avebury, on this subject, in which he stated:
“The UK Government continues to engage actively with the OTs to encourage them to make improvements to their AML and CTF regimes in line with the international standards … However, the OTs are separate jurisdictions with their own democratically elected governments and changes to their regimes will ultimately be a decision for the locally elected government of each Territory”.
That is not an adequate response. It is simply not in the economic interests of the overseas territories to comply with the demands made on them. I understand that but it does not mean that they can be allowed simply to carry on as they have done for many years. Noble Lords may have noticed that three of the overseas territories were named in the US Department of Justice FIFA indictment recently: the British Virgin Islands, the Cayman Islands and Turks and Caicos—all tax havens.
Many of the offshore jurisdictions are theoretically under the influence of the UK Government but no British Overseas Territory has yet accepted the Prime Minister’s call at the G8, two years ago, for public transparency about who owns companies and trusts. Indeed, many have yet to show a genuine attempt to resolve money-laundering risks presented by anonymous owners hiding behind companies registered in their territories. The Labour Party had a commitment in our election manifesto to compel the overseas territories and Crown dependencies to address wider money-laundering risks associated with anonymous companies in the UK. With determination, there are ways in which it can be brought about. I invite the Government to investigate that.
Commitments to take a stronger line on this were certainly given by the Government during debates earlier this year on what became the Small Business, Enterprise and Employment Act. That legislation requires a public register of the true owners of UK-registered companies and I very much look forward to the register becoming live. It was a welcome and significant step forward for corporate transparency but, as the Transparency International report shows, the UK property market remains vulnerable to the investment of corrupt capital due to the secrecy around the owners of offshore companies.
The Prime Minister has stated that he intends to put corruption at the heart of his agenda at the United Nations in September and at the G20 in Turkey, culminating in a major anti-corruption summit in London next year. The Government have just announced that Sir Eric Pickles will be their new Anti-Corruption Champion. It seems he will have a larger portfolio than his predecessor, especially with that anti-corruption summit in mind. I imagine that he will want to consider the recommendations of the Transparency International UK report in detail. I hope the Minister will confirm that he intends to meet Sir Eric as a matter of priority to consider the report and how he can contribute to the discussions on these crucial matters. The Prime Minister has raised consciousness of the issues surrounding corruption. The Government now need to follow through to bring about meaningful change.
Lord Davidson of Glen Clova (Lab)
My Lords, this is a timely and useful debate, prompted by my noble friend Lord Rooker, on the very useful work of Transparency International.
The impact on housing of houses being treated as a store of value—as my noble friend Lord Graham identified—is an important effect. The noble Baroness, Lady Stern, significantly refers to the source of corrupt funds, and how it can come down to individual lives, often in places far from the UK such as Kyrgyzstan. My noble friend Lord Watson of Invergowrie spoke eloquently on the scale of global corruption and its impact on the UK’s reputation. We on this side welcome the Prime Minister’s desire to,
“put fighting corruption at the heart of our international dialogue”,
and,
“do more to … support the investigators and prosecutors who can help bring the perpetrators to justice”.
He is correct to build on the Bribery Act 2010, introduced by the previous Labour Government, which brought issues of bribery and corruption to the fore in the boardrooms of UK plc, and set a global standard in the fight against economic crime. Corruption, by its nature, is insidious, frequently leaving its victims unclear why they have suffered its consequences. Since the perpetrators have a direct interest in secrecy, society can be unaware of the extent of corruption in its midst. In the UK we tend to congratulate ourselves on being relatively free of domestic corruption, but we should recognise that this belief is not always justified.
The various reports of Transparency International identify a range of concerns about UK practices in areas such as prisons, politics and the arms trade. These are matters for concern. Over the last few years, a number of major UK companies have come under investigation by the US and Chinese authorities for practices that are—on any view—plainly corrupt. Corruption knows no borders and the international approach that the Prime Minister commends is correct. He doubtless embraces the anti-money laundering regime introduced by the EU directive. The Government’s intention to strengthen, not gold-plate, our regime with a beneficial ownership register for UK companies is welcome.
Our money-laundering regime is subject to review by the Financial Action Task Force next year. The Transparency International report identifies real vulnerabilities in this regime, as I am sure that the Minister must agree. The UK’s own current review has, one trusts, already identified this and no doubt other areas of concern in our system—perhaps the widespread use of companies incorporated in British Overseas Territories. It would be encouraging if the Minister would share with the House what the review has exposed thus far and what action is being considered. I ask him to please do so. Plainly, the review is not yet complete but some indications of where it is going will be welcome. Anti-money laundering law is a central tool in the fight against corruption.
While no society is safe from corruption, no society finds the reduction, let alone the removal, of corruption an easy task. In the past, the UK rooted out corruption in areas such as the Royal Navy, the judiciary and the Civil Service, but only after years of consistent effort. The task, however, is never finished. The principal tools for the task are political will and resources. There is, of course, no government leader who does not speak out against corruption, whether they are the embodiment of corruption themselves or its most stalwart opponent. Words alone do not suppress corruption. Therefore, action backed up by resources is the test of any Government’s resolve.
Some positive indicators are available. The coalition Government’s anti-corruption plan, which was published in December 2014, ambitiously set out 66 action points. Is the Committee to take it that Her Majesty’s Government remain committed to executing this plan? Is, for example, the proposed offence of corporate failure to prevent economic crime to be implemented? Transparency International’s innovative recommendation of unexplained wealth orders, as referred to by my noble friends Lord Rooker and Lord Watson, has many attractions. Does Her Majesty’s Government agree on the utility of such orders and will they introduce them?
Other questions are: will offshore companies be required to register the acquisition of at least some types of UK assets and their beneficial ownership? Will persons in the regulated sector conduct due diligence on customers? Will they require transactions to be reported to a central body? A reply in the affirmative to these proposals would encourage one to believe that political will is present. If that will is present, there could be no better signal than a commitment to increase substantially the resources for those investigators and prosecutors identified by the Prime Minister as bringing perpetrators to justice.
The Serious Fraud Office, a central agency in the fight against corruption, has seen a dramatic improvement in its effectiveness under David Green as director-general. But its budget in 2008 was £52 million; in 2015, its budget is £35.2 million, with the necessity of having to obtain ad hoc so-called “blockbuster funding” from Her Majesty’s Treasury. Strong management and direction are to be applauded, but is this the best method of funding a principal agency? The National Crime Agency is also said to be lacking resources. Her Majesty’s Treasury may have a view that contradicts this; perhaps the House may hear what it is. Has the notion of combining the Serious Fraud Office with the National Crime Agency been put to sleep or will the uncertainty of reorganisation, with its concomitant and inevitable disruption, continue to hang over these organisations?
In his international dialogue, it is significant that the Prime Minister can put the UK in the vanguard in the fight against corruption. While the UK’s record is by no means spotless, its stance on the rule of law, both historically and to date, has international resonance. Leaving aside the Government’s somewhat illogical antipathy to the Human Rights Act, the UK can be recognised as a real force for good in combating corrupt practices. Talk is cheap. To achieve this goal and to be taken seriously internationally, a well-resourced system of enforcement is essential. May the House have the undertaking from the Minister that his Government are truly committed to providing the necessary resources?
I would also welcome a response to inquiries that have been made by my noble friends Lady Smith and Lord Bach, as shadow Attorney-General, as to whether there is any UK investigation into British involvement in the allegations relating to FIFA. Is any response available, perhaps less gnomic than that provided hitherto, claiming awareness of the issue? I look forward to the responses.
Lord Ashton of Hyde (Con)
My Lords, I am delighted to answer this Question for Short Debate and I too thank the noble Lord, Lord Rooker, for securing it. I acknowledge the remarks made by him and other noble Lords about the Prime Minister’s efforts in this area of corruption, both in the UK and worldwide.
Corruption, of course, is more than just about property and I would like to make some remarks about the Government’s view on corruption generally. This Government recognise that corruption harms societies, undermines economic development and threatens democracy. As the Prime Minister made clear to the G7 last week, corruption is the cancer at the heart of so many problems we face around the world today, and again the noble Lords, Lord Rooker and Lord Watson, mentioned these remarks. The UK has robust anti-corruption structures and legislation in place and we know that the problem of corruption is relatively less serious in the UK than in most other countries, although the noble and learned Lord, Lord Davidson, did warn about becoming complacent in this regard. The impact of corruption in this country is disproportionate to the level and frequency at which it occurs, and often has serious ramifications in terms of public confidence across the public and private sectors.
Before I address the more specific issues raised in this report, I want to make it clear that the Government are absolutely committed to tackling corruption in all its forms. Our commitments in the Serious and Organised Crime Strategy to tackle criminal finances and improve our anti-corruption systems demonstrate our determination to make the UK a more hostile environment for those trying to launder their illicit money. As I am sure noble Lords are aware, this Government are doing more than ever before to tackle the blight of corruption here in the UK and around the world, the effects of which were elegantly highlighted by the noble Baroness, Lady Stern. In December last year, we published a cross-government UK Anti-Corruption Plan. It set out for the first time all the UK’s activity against corruption: from preventing corruption in the first instance to taking effective enforcement action when it does occur, as well as increasing the protection of the public and private sectors. As has been mentioned, the Prime Minister recently appointed Sir Eric Pickles as the UK’s Anti-Corruption Champion to lead and co-ordinate all anti-corruption efforts. He will be working across government to ensure that the commitments set out in our anti-corruption plan are fully implemented—an answer, I think, to the noble and learned Lord, Lord Davidson—and to make a real difference on some of the points raised today.
We already have some of the most comprehensive anti-bribery legislation in the world, and were recently judged by the OECD to be one of only four countries globally which actively prevent bribery of foreign public officials. Where we have found gaps in the legislation, such as in relation to police corruption and participation in the activities of an organised crime group, we have brought forward new measures to address them.
As a centre of world trade and investment, we have a particular responsibility and incentive to ensure that our financial systems are not a safe haven for the criminal and the corrupt. In the UK’s 2013 G8 action plan we committed to conducting the UK’s first national assessment of money laundering and terrorist financing risk. This national risk assessment—mentioned by the noble and learned Lord, Lord Davidson—will be the first systematic assessment of threats and vulnerabilities in the UK. It will provide an evidence base to help the Government assess the effectiveness and proportionality of the current requirements, and we intend to make the findings available soon. We have already committed to producing an Anti-Money Laundering Action Plan to address the threats and vulnerabilities identified in the national risk assessment. We will carefully consider the evidence in Transparency International’s recent reports as we formulate that action plan.
Turning to the specific issue of money laundering through the purchasing of property, we are also committed to ensuring that we maintain a proportionate and robust anti-money laundering regime. All estate agents must be registered under the Money Laundering Regulations 2007, and HMRC carries out compliance checks to ensure that estate agents are applying customer due diligence processes. HMRC is also working to educate the sector more and bolster businesses’ understanding of their obligations under the Money Laundering Regulations. All banks, lawyers and estate agents are required by law to report suspicious activity to the National Crime Agency. We do have some concerns that the suspicious activity reports—SARs—regime does not work as well as it should, and think that information sharing between the private sector and law enforcement agencies could be improved. That is why the Government are reviewing the SARs regime in order to increase its effectiveness.
In the Serious Crime Act 2015, we have created a new offence of participating in the activities of an organised crime group, which came into force on 3 May 2015. This new offence targets those who help organised criminals with their criminal enterprises, and would include professional enablers such as estate agents, on whom organised criminals rely. From 2016 all UK companies will have to register their beneficial owners at Companies House. Where a property is owned by a UK company, information on that company’s beneficial ownership will be immediately accessible, online and for free, once submitted in the register of people with significant control.
The Government are continuing proactively to lobby other jurisdictions, notably in the context of the G7 and G20 and through the Financial Action Task Force, to take equally ambitious action on transparency of company beneficial ownership. This applies also to the overseas territories and Crown dependencies. I will answer specific questions about those in more detail later. Following UK leadership in the G8 and G20, leaders committed in 2013 to implement fully the international standards for beneficial ownership transparency and to submit action plans to this effect. The standard requires that information is available in a timely fashion for competent authorities. Central or public registries are one means of achieving this standard. The Government continue to encourage international partners to meet their commitments so that where UK property is owned by a non-UK company, information on that company’s beneficial owners could also be quickly and easily obtained.
The noble Lord, Lord Rooker, asked specifically about overseas territories and Crown dependencies. The point was made that we could do more to make overseas territories and Crown dependencies have beneficial ownership records. We are working closely with the overseas territories and Crown dependencies. We believe that they have made significant progress on tax transparency. They have publicly committed to the transparency of company ownership. We believe that more has been achieved in the past year than over the past 10 years.
Lord Watson of Invergowrie
Perhaps the Minister can elaborate a little. He said that the overseas territories have committed to transparency on ownership of companies. I was not aware of that. I wonder if he could let me know—if not now, in writing—because if it is true, that would be welcome news and I am certainly not aware of it.
Lord Ashton of Hyde
I will let the noble Lord know in writing. I am relying on my brief on this—I am sure it is true, in that case. But I certainly will write to the noble Lord.
Bermuda already has a private central registry. Gibraltar will implement a central registry under the EU’s fourth money-laundering directive. The Prime Minister has made it clear that he would like a publicly accessible central register of company beneficial ownership to be the new international standard. We would therefore like the overseas territories to match our policy. However, we respect the fact that the overseas territories and Crown dependencies are separate jurisdictions with their own elected governments who are responsible for fiscal matters. We want to continue to work in partnership with overseas territories and Crown dependencies on this important issue.
The noble Lords, Lord Rooker and Lord Watson, also mentioned unexplained wealth orders. We are always interested in proposals for new powers that will help law enforcement agencies and prosecutors to tackle money laundering, and will carefully consider Transparency International’s proposals on unexplained wealth orders as part of the national risk assessment.
On the Government’s response to recommendation 3 in Transparency International’s report for a supervisors’ forum, supervisors already attend forums where cross-cutting issues are discussed. The next meeting of the supervisors’ forum is on 5 November. If customer due diligence cannot be completed as far as recommendation 2 is concerned, including identifying the beneficial owner, then the estate agent cannot do business with the prospective client.
The noble Lord, Lord Graham of Edmonton, made some interesting points, mainly about housing policy rather than corruption per se. Buying and selling is legal and is registered with the Land Registry but, of course, if the behaviour breaks the law either corruptly or through intimidation then the full force of the law will be applied and the Government support that. Sir Eric Pickles will bear down heavily on any corrupt activity.
Lord Graham of Edmonton
Can the Minister tell me whether the phenomenon I mentioned of individuals buying up properties and misusing them is monitored by the Government? Can he indicate whether the Government intend to do something in the future?
Lord Ashton of Hyde
I will answer that in writing as I have only three minutes left. The noble Lord also talked about the mechanism to trace properties sold under the right to buy. We have a comprehensive anti-money laundering regime. Money laundering through property has been assessed in the UK’s first national risk assessment, which will be published in due course.
Lastly, corruption in foreign countries was mentioned by the noble Baroness, Lady Stern. As noble Lords will know and as I think they have acknowledged, the Prime Minister has urged world leaders at the G7 meeting to tackle the cancer of corruption.
I hope noble Lords will accept that the Government are doing a lot despite the remaining problems. My time has nearly run out, so I am going to have to write to noble Lords in due course on the questions I have not answered.