Criminal Finances Bill

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

Second Reading

11:38

Moved by

[Baroness Williams of Trafford]

That the Bill be now read a second time.

[The Minister of State, Home Office (Baroness Williams of Trafford) (Con)]

My Lords, serious and organised crime threatens our national security and prosperity, but for the victims the greatest impact is the harm that it inflicts on their lives and personal well-being. This criminality can affect anyone: from those caught up in gang warfare to the slaves forced to work or subjected to abuse by human-trafficking gangs, to the victims of scams and cyberattacks designed to steal their money and that of their friends and families. It is all-pervading—it undermines our safety, prevents prosperity and corrodes communities. The perpetrators of these crimes do so largely to make money—that is almost always their primary motivation. The Government have therefore brought forward the Criminal Finances Bill to combat the money laundering that allows criminals to fund their lavish lifestyles and reinvest their illicit gains in their criminal enterprises.

The origins of this legislation lie in the Government’s 2013 Serious and Organised Crime Strategy, which sets out a clear goal of working with the private sector to make the UK a more hostile place for financial criminals. More recently, last year the Government’s Action Plan for Anti-money Laundering and Counter-terrorist Finance identified how to build on the UK’s risk-based approach to addressing these parallel threats. As noble Lords may well be aware, the tactics used by serious criminals are often employed by those seeking to fund terrorist-related activity, so the police and others must use similar methods in their response to both. The Bill will give effect to the legislative aspects of the action plan, making it a key part of one of the most significant changes to our anti-money laundering and counterterrorist finance regime in over a decade.

Specifically, the Bill will help law enforcement officers to tackle money laundering, recover the proceeds of crime and international corruption, and, where possible, return these assets to victims. Part 1 provides for unexplained wealth orders, or UWOs, as I will refer to them—a valuable new device to investigate those suspected of money laundering, requiring them to explain the source of their wealth to a court. Where they cannot do so, law enforcement agencies can look to recover those assets. I recognise that there may be questions about the operation of this power and it may help noble Lords if I briefly clarify how it will work.

If a law enforcement agency suspects someone of involvement in serious crime where their wealth appears to exceed their known income, it can apply to the court for a UWO. The power can also be applied to non-European politicians or officials who may be involved in corrupt activities but where evidence of their links to criminality is not easily available. The individual would then need to satisfy the court that their property had been lawfully acquired. If they did not provide an adequate explanation, the authorities could seek to recover their property. Crucially, these orders are only an investigative tool; the tests for any further legal action, including prosecution or civil recovery, would still need to be satisfied.

The Bill will also enhance the existing seizure and forfeiture powers in the Proceeds of Crime Act 2002, also known as POCA. Although the police can currently seize cash, they cannot do likewise with money in bank accounts or where criminals store their profits within other items of value, such as casino chips, precious metals and jewels. As criminals adapt, so must we, and we are extending these powers accordingly. The provisions seek to extend the use of another useful investigative tool—disclosure orders—to money-laundering investigations.

This Government are committed to working in partnership with business on these crucial issues. A key element of this partnership will be the changes that we are making to the suspicious activity reports, or SARs, regime, which allows regulated companies such as banks to provide critical intelligence to our law enforcement agencies. In particular, the Bill will create a specific gateway to allow the sharing of information between regulated companies so that they can submit better-quality reports.

This approach has been piloted under the Joint Money Laundering Intelligence Taskforce, otherwise known as JMLIT, and I have heard first hand from both banks and the NCA about the positive results that it is delivering. For example, from May to July 2016 the JMLIT helped to deliver 37 arrests of individuals suspected of money laundering, the closure of 114 suspicious bank accounts and the restraint of £145,000 of suspected criminal funds.

In addition to these measures on money laundering, Part 3 of the Bill creates vital new offences of corporate failure to prevent tax evasion. This means that we will be able to hold to account companies which unreasonably fail to prevent their staff criminally facilitating the evasion of taxes, either in the UK or overseas. These measures will ensure that anyone wishing to do business here must have the highest possible standards of compliance and enforcement, helping the UK to maintain our place as a world leader in tackling corruption and tax evasion.

I have spoken primarily about criminal activity but, as I have said, we must also address the vulnerabilities in our financial system that are exploited by terrorists. As such, Part 2 of the Bill makes complementary changes to ensure that relevant measures being provided for money-laundering investigations will also be available for investigations into terrorist financing. By starving terrorist groups of funding, we aim to take away their ability to buy weapons, plan attacks and fund the propaganda that incites others to follow their evil ideologies.

Throughout the Bill’s scrutiny in the House of Commons, the Bill was the subject of notable cross-party support. There is consensus that these measures will make a real difference in the fight against money laundering and terrorist finance, and I trust that noble Lords will reach the same conclusion. However, there have been, as ever, some areas where we have been pushed to do more. I am pleased to say that the Government have listened and we have amended the Bill on Report in the Commons to allow for the civil recovery of any proceeds of gross human rights abuse overseas. This amendment was prompted by the horrific treatment of Sergei Magnitsky, a Russian tax lawyer. I have read about this case; Magnitsky’s treatment was truly shocking, and it is only one example of the many atrocious human rights violations committed globally every year. I welcome the fact that we have taken action, sending a clear statement that we will not allow human rights abusers to launder their criminal assets through the UK.

I am also sure that noble Lords will be interested in the issue of company ownership transparency in the British Overseas Territories and Crown dependencies. I stress that this Government have led the way in the fight against global corruption and we remain committed to working with these territories on this agenda.

I know that these topics, and others, will be of interest to many noble Lords and I look forward to debating them today and over the coming weeks. This is an important piece of legislation. It will make a significant contribution towards tackling the twin threats of money laundering and terrorist financing. The men and women of our law enforcement agencies do great work in combating those threats, and many in the private sector are dedicated to helping with this effort. The Bill will help provide them with the powers and legislative framework they need to do so more effectively. We continue to work closely with law enforcement agencies, the regulated sector and the devolved Administrations on the provisions and may bring forward some further technical, but essential, amendments in Committee. I will, of course, keep noble Lords updated.

The UK is a great place to do business. We should be proud of our status as a global financial centre, and we must protect it. We are a world leader in the fight against global corruption: this is important work and it must continue. We must do all we can to protect the most vulnerable in our society, to keep everyone safe and prosperous. I beg to move.

11:48

[Lord Rosser (Lab)]

My Lords, I thank the Minister for setting out the purpose and provisions of the Bill and for her earlier letter which covered the same ground. The Government’s Explanatory Notes on the Bill state that it makes,

“the legislative changes necessary to give law enforcement agencies, and partners, capabilities and powers to recover the proceeds of crime, tackle money laundering and corruption, and counter terrorist financing”.

The notes go on to say:

“The measures in the Bill aim to: improve cooperation between public and private sectors; enhance the UK law enforcement response; improve our capability to recover the proceeds of crime, including international corruption; and combat the financing of terrorism”.


This Bill has already been through the House of Commons, where we supported its aims and objectives but pursued points which reflected our feeling that the Bill did not go as far as it could have done in providing statutory and other backing for investigating and combating money laundering, tax evasion, corruption and the financing of terrorism in this country and overseas. Our approach in this House will be very similar.

As the Minister has said, the Bill provides for new orders and powers and enhancements to existing orders and powers: in particular, a new unexplained wealth order; increasing the scope of disclosure orders to cover money laundering investigations; an extension of existing seizure and forfeiture powers; a strengthening of suspicious activity reporting; a widening of investigatory powers into the funding of terrorism; and an extension of facilitating tax evasion offences to companies involved in such activities.

In her letter to which I referred, the Minister said that this Bill had been described by Transparency International UK as,

“one of the most significant pieces of anti-corruption legislation in the past few decades”.

However, unless I am mistaken, Transparency International, in expressing its concerns about the UK’s role as a safe haven for corrupt assets, has also said that,

“The UK’s Overseas Territories should require company beneficial ownership information to be made public, in a format that is free and searchable”—

an issue that this Bill does not address. The United Kingdom publishes a central register of beneficial ownership—why not our overseas territories as well? Surely we have a responsibility to ensure transparency in our tax havens.

The British Virgin Islands was by far the most widely used tax haven in the Panama papers, with over half of the 214,000 corporate entities that came to light in the Panama papers being registered in the British Virgin Islands. More than 75% of corruption cases involving property investigated by the Metropolitan Police’s proceeds of corruption unit involved anonymous companies registered in secrecy jurisdictions, 78% of which were registered in the UK’s overseas territories or Crown dependencies.

Three years on from the first request from then Prime Minister to our overseas territories to consider public registers, only Montserrat has so far committed to introducing such a register. The only agreement so far has been to create central registers of beneficial ownership and provide UK law enforcement agencies with access within 24 hours. Yet, in 2014, the then Prime Minister wrote to the overseas territories stating that,

“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion”.

What do the Government intend to do about this situation?

Unfortunately, the Government have confirmed in the letter of 6 March sent to Members of this House that they have significantly changed and weakened their previous stance to which I have just referred. Their stance now, as the letter says, is simply:

“It remains our ambition that public registers become a global standard. If and when they do, we would expect the Overseas Territories and Crown Dependencies to follow suit”.


The United Kingdom, along with its overseas territories and Crown dependencies, is the biggest secrecy jurisdiction in the world, and yet there is no question now, as far as the Government are concerned, of expecting our overseas territories and Crown dependencies to follow us and establish public registers of ownership. Instead, the Government’s approach is that if public registers become a global standard, they would expect our overseas territories and Crown dependencies to follow suit. If public registers do not become a global standard, then that presumably is the end of the matter as far as the Government are concerned.

As long ago as 2011, a World Bank study found that 70% of over 200 corruption cases involved the use of anonymous shelf companies to launder funds and conceal the identity of corrupt politicians. Anonymous companies are also used to launder corrupt and illicit funds into the UK, and transparency about the beneficial owners of these companies—companies which can be created in a matter of hours—has been identified as an important part of the solution to tackling the laundering of such funds.

The OECD has estimated that tax havens may be costing developing countries a sum of up to three times the global aid budget. Corruption hits developing countries very hard: around $1 trillion flows out of developing countries via illicit financial flows every year. Africa is a net creditor to the world. Private registers of beneficial ownership will not be accessible to people in developing countries, which is where people suffer the most from the financial secrecy that tax havens offer. The reality, surely, is that, as more registers of beneficial ownership become public—as has happened in this country—the quicker that will become the norm and universally accepted. The EU Parliament has now voted for public registers of beneficial ownership to be in place across the EU.

Maybe there is some overwhelming reason why action cannot be taken in regard to our overseas territories. If so, no doubt the Government will set that out in responding at the end of Second Reading. It certainly does not appear that there is a bar in legislating, because, as I understand it—perhaps incorrectly—as a matter of constitutional law the UK Parliament has power to legislate for the overseas territories.

While this Bill addresses the issue of corporate liability, amendments were nevertheless tabled in the Commons to extend the application of a “failure to prevent” approach in the Bribery Act 2010 to other forms of economic crime, such as fraud and money laundering. The Government have called for evidence on this issue, but there needs to be sufficient deterrence to corporate misconduct, and arguments have been put forward that there should be a strict, direct corporate liability offence, along the lines of, I believe, Section 7 of the Bribery Act 2010. Perhaps the Minister can respond to that point when she replies to the debate.

A case can also be made for saying that the ability to prosecute companies should be extended not only to economic crimes but also to cases of severe harms caused to individuals, including those overseas. The Business & Human Rights Resources Centre recorded over 300 allegations of human rights abuses made against 127 UK-linked companies between 2004 and 2014. Despite evidence that some companies were potentially repeat offenders, there have been no corporate criminal prosecutions. Nearly half of the allegations were made against extractive companies. Are the Government looking to extend the terms of this Bill to enable prosecutions to be made more feasible against companies, as opposed to individuals, for crimes of this kind?

Billions of pounds in corrupt money comes into this country every year. The National Crime Agency has indicated that the amount of money laundered in this country each year could be as high as £90 billion. It is not clear, though, what provisions in this Bill are intended to address the effectiveness, or otherwise, of our anti-money laundering system. There are a large number of supervisory bodies in the relevant sectors, which leads to a fragmented approach over identification of risks and their mitigation and the approach to enforcement. It also raises the question of whether some of the 27 supervisory bodies have conflicts of interest when 15 are also lobby groups for the sectors they supervise, for example. Once again, it would be helpful if the Minister could address this point about the need to overhaul our anti-money laundering system if we are to stop billions of pounds of corrupt money coming into this country each year, and indicate how this issue is addressed in the Bill.

On the enhancements to the suspicious activity reporting regime, will there also be, for example, a system for prioritising suspicious activity reports in order to help ensure that the resources of the law enforcement agencies are deployed to maximum effect and benefit? There were over 380,000 suspicious activity reports in 2015, ranging from the theft of small amounts of petty cash to suggestions of serious organised crime. What are, and will be, the procedures for ensuring that scarce resources are not spent processing minor crime reports coming via the suspicious activity regime at the expense of investigating more serious activity reports?

If the measures provided for in the Bill—which we support, albeit that they could have gone further—are to be effective and made to bite, the necessary resources will need to be provided. Whether we are talking about the new offences and powers in the Bill or the extension of existing powers, further resources, not least financial and staff resources, will surely be required. What are the Government’s intentions in this regard, and which agencies will be responsible for implementing and enforcing the new powers set out in the Bill, apart from the National Crime Agency? For example, will Border Force be involved, or the many individual police forces in this country, and if so, in what way? What is the Government’s assessment of the impact of this Bill on the forces and agencies, including our security and intelligence agencies, which will be responsible for implementing its provisions?

I have indicated our support for the aims and objectives of the Bill, but as I have also stated, there are areas where we think that more could be done than appears to have been provided for. There is also the issue of resources and the effectiveness of our systems and processes, not least in relation to combating money laundering. As the Minister has said, the Bill is not seeking to address victimless crimes. We want it to prove to be about more than just good intentions. Instead, it should play a key part in the process of ending the situation where this country appears to be a money-laundering hub so that we show what can be achieved, in particular on coming down hard on money laundering and the purposes for which it is used, as well as on tax evasion through schemes and arrangements that have not been cleared by revenue and customs. We want to ensure that we can show the wider world what can be achieved in this regard.

12:01

[Baroness Kramer (LD)]

My Lords, like the Labour Benches, we are supportive of the overall purpose of the Bill and the majority of its clauses, in particular as amended by the Magnitsky amendment with its powers to freeze the UK assets of those suspected of abusing human rights. Our goal both at Second Reading and in the stages that follow will be to strengthen the Bill. We have a number of what I would say are relatively small but significant issues that we want to tackle, but most of our conversation will be about issues that are not in the Bill but which we think it should address. I will just say in this context that several of my colleagues are speaking in this Second Reading debate and so quite a number of issues, from corporate governance to POCA, will be covered by them. We thought that the House would appreciate not hearing repetition where it is avoidable.

As we all recognise, the purpose of the Bill is to crack down on both corruption and tax evasion. It seems impossible to address those issues without looking at the overseas territories and Crown dependencies. I do not want to repeat what was said by the noble Lord, Lord Rosser, but we all understand that everybody’s ideal would be a central register of beneficial ownership that is publicly available in every location.

We on this side feel that this is an opportunity to push the issue further and we hope that the Government will consider taking advantage of that, but we also recognise that the overseas territories and Crown dependencies are in different positions both with regard to the authority of the UK Government and in the degree to which they have progressed along this track. As I understand it, all three Crown dependencies have a central register, which, although not publicly available, can be examined by UK tax and law enforcement authorities—but the picture is much more varied for the overseas territories, while the particular issues with regard to Gibraltar are made even more complex by our upcoming exit from the EU. But we all recognise that the Panama Papers were a serious wake-up call for anybody who was complacent in this area and we look to the Government to treat this as an opportunity to act.

We also want to raise questions with the Government about our capacity to investigate and enforce, both under the relevant clauses in this Bill and more generally, across the area. Only today OLAF, the anti-corruption body of the EU, made it clear that the UK may be liable for a €2 billion fine for its failure to crack down on customs fraud by Chinese clothing importers—an issue that apparently has been brought to the Government’s attention on many an occasion.

I do not know the rights or wrongs of that, but when we look at the range of issues we are all aware that many people are concerned about the mechanisms of property ownership, in particular the ownership of high-value properties in areas such as central London. The All-Party Parliamentary Group on Anti-Corruption has drawn our attention to more than £4 billion-worth of properties that have been bought with suspicious wealth. That surely has to be an area of concern.

Some have raised concerns over the care sector and the structure of its ownership. I remember the shock in this House in 2015 when Barclays, which you would think would be totally aware of these issues, was fined £72 million by the FCA over what was known as the “elephant deal”, a £1.9 billion deal in which it elected to provide confidentiality for politically exposed people engaged in that deal by outrunning its own procedures. As I remember, the documents were typed on a typewriter so that they would not be in the computer and internal compliance system, and the cash was put in a safe brought in to the team’s offices for that purpose. How any institution would think it should be able do that is quite shocking and reflects the lack of respect in many areas for our actual capacity to enforce. That must surely be addressed.

An issue very close to my heart that I want to engage with in the Bill is the protection that we offer—or rather, do not offer—to whistleblowers. It seems entirely pertinent across the whole range of issues covered by the Bill. When I was a member of the Parliamentary Commission on Banking Standards, we looked at whistleblowing, but I do not think that we came out with recommendations that were strong enough or pushed hard enough for action on this front.

For anybody who doubted it, the issues with RBS and its global restructuring group will underscore the risks that whistleblowers face. As many in this House will know, the whistleblowers who exposed what was happening with RBS and its GRG typically found that it was a career-ending move. They lost their jobs, suffered great personal stress and personal crisis and have not received protection as a consequence. Others will be very well aware that in the United States the career-ending impact of whistleblowing is widely recognised. That is why compensation schemes for whistleblowers who expose real fraud or misuse are in place. That is an area we have to explore.

Every one of us will agree, I think, that profiting from crime, funding terror and evading tax have absolutely no place in the UK. It is our purpose to row in behind the Government and then strengthen the Bill, which provides an opportunity to tackle those egregious and completely unacceptable forms of behaviour and criminality.

12:07

[Lord Brown of Eaton-under-Heywood (CB)]

My Lords, if my speech appears somewhat bland, as I fear it may, it is not for any want of enthusiasm for the Bill, but rather because I have not yet had time to give it the full and detailed scrutiny that it undoubtedly requires.

I applaud the Bill’s intent: in broad terms to strengthen and widen our powers to strip international and domestic criminals—fraudsters, money launderers, terrorists, tax evaders, gross human rights abusers and so on—of their ill-gotten gains. I am in no position to criticise, but I regret the Bill’s length and complexity at 171 pages. This is in the context of an existing regime essentially based on the Proceeds of Crime Act 2002, the subject of a leading Oxford University Press textbook, which itself is more than 700 pages. There have been a large number of reported cases on POCA over the last 15 years, all of which resulted in lengthy judgments—alas, not all easily reconcilable. Indeed, I had the misfortune to sit on several of them, though fortunately not on one of the last leading cases, Waya, heard in the Supreme Court in 2011-12. The first hearing, before five justices, failed to produce any coherent judgment, even by a majority. It had to be relisted some months later before nine justices, including the then Lord Chief Justice, my noble and learned friend Lord Judge. The judgment then took a further nine months to prepare. I mention these matters only to emphasise the inherent complexity of this area of the law and the absolute need to produce clarity and, wherever possible, simplicity in the provisions being introduced by the Bill.

That the Bill is highly desirable in principle cannot be doubted. The May 2013 foreword by the then director of the Serious Fraud Office to the OUP book I mentioned referred to the huge improvement effected by POCA on the very limited scheme, first introduced in the Criminal Justice Act 1988, for ensuring that crime should not pay, but it also recognised remaining weaknesses and gaps in the POCA scheme. The editors of that book suggested, in their preface, the need to re-examine the existing regime and for new and reinvigorated emphasis to be placed on the recovery of ill-gotten gains.

On the statistics, the editors pointed out the regrettable failure of POCA to have made any effective breakthrough in terms of recovery—rather the reverse. The annual proceeds of crime in 2013 were estimated, very roughly, at between £19 billion and £48 billion a year. Annual recovery by way of all measures—cash forfeitures, criminal confiscation, civil recovery and, indeed, penal taxation—amounted in each of the five years from 2006-07 to 2010-11 to between only £125 million and £161 million. It is greatly to be hoped that, with the enlarged enforcement powers provided by the Bill, a very substantially higher proportion of criminal gains will be recovered by the state and, to my mind altogether more importantly still, stripped from the criminals.

There is much to be welcomed in the Bill. Of course, it goes well beyond curing the deficiencies in the existing POCA scheme. A number of the individual measures positively gladden the heart. Prominent among them, surely, are the unexplained wealth orders, the enhanced and improved suspicious activities report regime, forfeiture of assets of gross human rights violators—the so-called Magnitsky amendment—corporate responsibility regarding facilitating tax evasion, measures to combat terrorist financing and so forth. Close scrutiny of these and much else will, of course, be for another day—or, rather, days—but for now I simply put on record my necessarily preliminary but otherwise full support for the Bill and wish it well.

12:13

[Lord Faulks (Con)]

My Lords, the Bill is largely a legislative reflection of the Action Plan for Anti-Money Laundering and Counter-Terrorist Finances published jointly by the Home Office and HM Treasury in April 2016. The objectives of both the plan and the Bill are to be welcomed. This country has a remarkable reputation for the rule of law, the independence of the judiciary and the integrity of our law enforcement agencies, but we face significant challenges from money laundering, financing of terrorism and major fraud. At a time of significant change in our international role, it is vital that we maintain this reputation. To do this we need to work with international groups and with the private sector. We should also ensure that our enforcement agencies have the resources they need. The Bill should help considerably, although legislation on its own will not be enough.

The National Crime Agency estimates that serious and organised crime costs the United Kingdom at least £24 billion annually and that money laundering could be taking place at a scale between £36 billion and £90 billion per annum, as the noble Lord, Lord Rosser, suggested. For understandable reasons these latter figures are rather vague.

The Bill was broadly welcomed when it was introduced and debated in the House of Commons. Some useful amendments expanding the definition of cash were made and, as we have heard, the Magnitsky amendment. The definition of cash to which the amendments referred was that in the Proceeds of Crime Act 2002—I have always pronounced the acronym “pokka” rather than “poker”; we may get into the same debate that they had in the Supreme Court about the pronunciation of “De Keyser”.

The amendment was introduced by a cross-party group of Back-Bench MPs led by my former ministerial colleague, Dominic Raab. The new provisions, although not as robust as those who put forward the amendment would have liked, nevertheless provided that the High Court could make an order to freeze the UK assets of individuals implicated in gross human rights abuses. A number of MPs emphasised that it was important that the new clause be actually used. The Minister in the Commons, Ben Wallace MP, agreed that the Government would collect data on the exercise of the new clause. I am glad about that confirmation, since it will enable Parliament to see whether the clause does not remain simply an aspiration.

UWOs mean that an individual or company will have to explain the origin of the assets that appear to be disproportionate to their known income and if they are suspected of involvement in or association with serious criminality. There are safeguards for this power and the decision to make an order will be made by a High Court judge. The orders have been widely used in Australia, among other jurisdictions, and are broadly considered to have been successful, although there was some pushback from the courts there where it was felt they had been used as a trigger response by enforcement agencies. It seems to me, however, that there are sufficient safeguards to ensure that the power is not resorted to in lieu of normal investigations. I understand that there will be a statutory code of practice, about which the House will no doubt want to hear.

In a sense, because the burden of proof will be on the individual or company to explain the origin of the assets, there will be very little that can be done to conceal matters, but one should not underestimate the ingenuity of lawyers who may be involved, at considerable expense, in representing wealthy individuals and companies that may be the subject of UWOs. I have seen the helpful Home Office flowchart indicating how the UWOs will work in practice, and my one concern is what happens if the subject responds with some sort of explanation but not much of one. It is suggested that the law enforcement agency will then decide whether the issue has been resolved or further investigation is required. I can imagine there may be something of a stonewall response; is it anticipated that the agencies will go back to court, or how will matters proceed generally?

Criticism of the Government was made in the House of Commons—and by the noble Lord, Lord Rosser, here—about the absence in the Bill of provisions covering overseas territories and Crown dependencies. I should declare an interest, having been the Minister at the Ministry of Justice with responsibility for the constitutional relationship between the United Kingdom and the Crown dependencies. I know that Jersey, Guernsey and the Isle of Man have been anxious to work effectively with the United Kingdom to assist in the international efforts to increase corporate transparency and to tackle tax evasion and corruption. All three have agreed to hold company beneficial ownership information in central electronic registers, or similarly effective systems, with near real-time access for UK law enforcement. Jersey has a non-public central register, accessible to UK law enforcement on request. Both Guernsey and the Isle of Man have agreed to establish a central register or similarly effective system, and work is under way to ensure implementation. In the case of the Isle of Man, legislation will be introduced in 2017; as to Guernsey, work is under way to ensure implementation by 2018.

The cost of taking measures to obtain the proceeds of crime from individuals and companies, or indeed to prosecute for fraud or related offences, can be very considerable. It is necessary sometimes to be pragmatic about these things and in this context I pay tribute to the Government for accepting the use of deferred prosecution agreements. These were introduced following an initiative by the former Solicitor-General, Sir Edward Garnier QC, and have been used effectively to obtain significant sums of money and to avoid the costs of prosecution. Most recently, the SFO entered into a DPA with Rolls-Royce, which was approved by Sir Brian Leveson, the President of the Queen’s Bench Division. The total sum in the UK settlement was £497.25 million plus interest and the SFO’s costs of £13 million.

We will no doubt discuss in Committee the provisions about terrorist financing, disclosure orders and suspicious activity reports. I accept the point made by the noble Lord, Lord Rosser, about not being obsessed by de minimis provisions in SARs. They will assist in the overall strategy that lies behind the Bill. Most of the changes seem sensible.

I cannot sit down before mentioning a story published in the Observer last Sunday about the enormous price the super-rich pay to keep their privacy. It appears that they are prepared to pay some £218,000 a year in tax rather than declare who owns the £20 million-plus megamansions in which they live—or do not live. The Government introduced this so-called envelope tax. The idea, presumably, was to crack down on dirty money. It has certainly brought in tax. The story suggests that tax receipts on all envelope properties worth more than £1 million came in at £178 million. Privacy is one thing, but this sort of tax deal seems contrary to the underlying philosophy which informs the Government’s approach, or certainly should. There may be respectable reasons for privacy, but equally, there may be some very far from respectable reasons. As many noble Lords know, large parts of the most expensive areas of central London are dark at night, and I suspect that many of these properties are owned by rich international financiers, some of whom will not have obtained their money honestly. Are the Government happy with this state of affairs? Perhaps the Minister can tell the House.

With some difficulty, and with the invaluable assistance of the Printed Paper Office, I managed to obtain a revised impact assessment in relation to UWOs. It suggested that perhaps 20 UWOs a year might be obtained. This was based on practitioners’ experience, presumably with freezing orders. This seems a rather modest ambition. Are UWOs going to be considered as simply part of the investigative toolkit, as the Minister seemed to suggest, or are they likely to be the basis of a major initiative? There are clearly opportunities, as I have indicated, but the agencies may have to be ready for expensive legal tactics to frustrate them.

I hope that some modest improvements in the Bill may be effected. The Minister always displays a willingness to listen, and she can count on my support in taking this Bill through your Lordships’ House. However, I ask all those who may be contemplating amendments to bear in mind what the noble and learned Lord, Lord Brown, said about the complexity that these provisions have previously involved and the risk that further elaboration may be required by the courts, so I hope amendments can be kept as simple as possible.

I hope that the legislative ambitions are reflected in an increase in the recovery of assets from criminals and in the enhancement of our reputation both nationally and internationally.

12:22

[Lord Rooker (Lab)]

My Lords, I pay tribute to our colleagues in the Commons for their work on the Bill. I will single out Dominic Raab, Margaret Hodge and Tom Brake.

The Bill does not reach all the parts that need reaching on financial crime, but it is progress. It remains the case that not a single UK financial institution has faced any criminal charges as a result of the 2008 financial crisis. Only individual employees have been charged. The employers—Barclays, USB and Deutsche Bank—have not faced charges, and we have the ludicrous position that it is still not illegal under current UK corporate liability law for companies to mislead their auditors.

I shall say one word on Brexit. As we seek new trading arrangements and relationships, it is crucial that our corporate liability regime is broadly equivalent to that of our major trading partners. In this respect, it is very worrying that the recent case, already referred to, of Rolls-Royce, reported extensively in the Financial Times on 21 and 22 January, might affect our trade deals. For directors to use nearly £700 million of shareholder funds to escape personal liability for their actions or the actions of those they supervise is questionable. The Serious Fraud Office must clean this up—but in view of my previous parliamentary run-in with Rolls-Royce in 1980, I will say no more.

I shall make four brief points. The first is on unexplained wealth orders. They are proportional and measured and are subject to judicial oversight. In respect of overseas politically exposed persons, they are really useful as they do not require suspicion of serious criminality. The key issue is the laundering of money from overseas in the UK. As the noble Lord said, it should be easier for UK law enforcement to investigate and act on the wealth of kleptocrats and corrupt officials.

In February last year, I was on the first UK kleptocracy tour. I was the only parliamentarian amongst the researchers, campaigners and journalists—but it was on a Thursday. The tour was specifically in respect of Russians and Ukrainians buying property in London. I will give two examples from the eight tour stops. We started in Whitehall at the property lying above the Farmers Club at 4 Whitehall Court. Flats 138A and 138B were purchased by Igor Shuvalov, ranked the fifth most powerful official in Russia, for a sum of £11.44 million—some 80 times his salary. The Russian register of companies shows that he and his spouse have the beneficial ownership of the company, Sova Real Estate, which owns the apartments. They operate care of Tulloch & Co., Hill Street, London.

We were treated at each address to the story of who allegedly lived there, how much was paid, who owned it, where the money came from, and a magical mystery tour through the British Overseas Territories and local authority files on planning applications. We parked outside Witanhurst Place, Hampstead; a home second only to Buckingham Palace in size. It was built originally by a British soap merchant in the 1920s and is now worth £300 million. It was purchased through a British Virgin Islands company by Andrey Guryev, then a Russian senator, who in 11 years never included it in his asset declaration.

My second point is on the anti-money-laundering rules. The new corporate offence of failure to prevent tax evasion in the Bill, which has already been referred to, should be applied to economic crimes such as money laundering. This is an essential next step. I often wonder why more attention is not paid to the lawyers and estate agents involved in property sales such as those to which I have just referred. They are usually smart, blue-chip operations that do not like the searchlight of sunshine on their activities. As far as I know, no bank has ever been prosecuted in the UK for laundering corrupt wealth from another country.

We need to catch up with the United States’ anti-money-laundering legislation regime and—wait for it—the EU directive on human trafficking and money laundering, which has a corporate liability formula stronger by far than the current UK regime. The UK Government promised to catch up but never have. Is it not ironic that we are going to catch up with the EU as a result of Brexit?

On 18 June 2015, I initiated a short debate in Grand Committee on the Transparency International report on how corrupt capital is used to buy property in the UK. I want to remind the Minister of just one recommendation in the report. This is not the first time I have raised this with the Government—these are not new issues. The recommendation was touched on by my noble friend from the Front Bench. It is that there should be greater co-ordination between the 27 anti-money-laundering supervisors in the UK.

I got nowhere with the Minister in the Moses Room or with his letter afterwards. This issue still needs to be addressed. The lack of co-ordination means that there is a failure to identify risks; the approach to enforcement is inconsistent, and is not transparent or effective; and there are conflicts of interest. As my noble friend said, 15 of the supervisors are lobby groups for the sectors that they supervise. Only seven control for institutional conflicts of interest and, in a survey, one even admitted to carrying out no targeted anti-money-laundering legislation monitoring at all during 2013. What are the Government doing about this and why is it not in the Bill?

Public procurement—this is my third point—is not in the Bill and ought to be. The Government appear to have a blind spot regarding corruption in public procurement. However, the NHS and local government are potential massive risks in the awarding of contracts. In the local government case, of course, it owns very substantial physical assets. At the Government’s anti-corruption summit in 2016, they committed to introduce a conviction check process to prevent corrupt bidders winning public contracts. This promise has not been implemented. Furthermore, there is no public information on its progress.

I have a proposal—I have come with a positive suggestion. The Government should ask their own anti-corruption champion, Sir Eric Pickles, to conduct a review at national level to assess the risks of corruption in local government and the NHS, with particular reference to procurement. Very high standards are observed by councillors and officers, but they are undermined by cases of misuse of position.

A Transparency International report on the conditions for local government corruption found that the following were present: low-level transparency, poor external scrutiny, networks of cronyism, lack of resources to investigate, outsourcing of public services, significant sums of money in play, a decline in the robustness to resist corruption and the reduced capacity of our local press. Sir Eric should be asked to look into this area.

My final point is to pay tribute to Bill Browder, chief executive of Hermitage Capital and author of Red Notice. I have not met Mr Browder, although I was present at a meeting in the Commons in 2015 where he spoke. I had previously read Red Notice and said at the meeting that I shed a tear as I read the part of it relating to the death of his lawyer, Sergei Magnitsky. I cannot see how anyone would not need a tissue as they read the account of his murder in a Russian prison.

I salute Mr Browder for his dedication and perseverance in trying to bring those guilty of the murder of his lawyer to justice—and for his sheer bloody-mindedness. Chasing them legally around the world, and now in this Bill, is a must. The Minister must also confirm what was said in the Commons: that the Government will use the powers in the Bill. I support it.

12:30

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will address the corporate liability aspects of the Bill, and therefore declare my interests in the register, in particular as a company director of companies large and small. I welcome the Bill, but it should go further to establish transparency on the beneficial ownership of companies in overseas territories, to enable corporate liability over a wider range of economic crimes in the future and to provide a less circuitous procedure for considering disqualification of directors when a company has already been found guilty of an economic crime.

The UK has made progress on tackling economic crime and improving transparency, but it is hard to get credit for that in the international arena when we are still seen as sponsoring tax havens. I was directly reminded of my country’s record many times—with varying degrees of friendliness or otherwise—while I was chair of the European Parliament’s Committee on Economic and Monetary Affairs, including in a public hearing with the OECD. We have not gone far enough yet. The bottom line is that people have a right to know who owns companies—not only would I say that is part of the incorporation licence and the fundamental bargain with society, but it would tackle tax evasion, money laundering and other offences.

We have had plenty of experience recently of how hard it can be to pin blame on large companies. The “directing mind and will” or the “identification doctrine”, as it is called, of responsibility is straightforwardly applicable to small companies, but for large companies it becomes almost impossible to find a chain of responsibility up to the board. Even if you do, collective failure does not count: you have to pin it on an individual. It is completely unfair, and divisive, for the law to bear down on small companies but not on multinationals. Sometimes the issue may be negligence more than criminal intent, which makes it entirely appropriate to address it with a “failure to prevent” offence. However, it is rather disappointing that only bribery and now tax avoidance are to be covered. I am aware that the Government have launched a call for evidence on corporate liability for economic crime, and that document usefully draws together several strands. The culture breakdown that led to the financial crisis brought about the senior managers and certification regime for banks, soon to be implemented for other financial institutions as well. There is a case to say that all large companies should have something similar. However, not all companies are regulated, and we do not have a proper company regulator—at least not yet—and a senior responsibility regime will have to attach to something.

We already have a list of financial and economic crimes elaborated in Part 2 of Schedule 17 to the Crime and Courts Act 2013, and there must be a strong case to say that all those should be treated consistently. The call for evidence puts forward some other liability options than the failure to prevent an offence, but in every liability option it suggests that a due diligence defence should be considered, rendering them very similar. The other options are fixing the identification regime, which needs doing separately anyway, or sectoral regimes such as the senior managers regime, which again falls into the “also needed” rather than the “instead” category.

Since Brexit makes a further Bill unlikely, why not enable further economic crimes to be introduced to this Bill through statutory instrument, enabling account to be taken of the call for evidence? Economic crimes can already be added to the Crime and Courts Act by order, so why not have something broadly similar in this Bill, with some safeguards about which I have some ideas? Companies should already have measures in place to prevent crimes done in their name, so for good companies it should not be a burden. For others it should engender a change in culture so that economic crime procedures are properly implemented and overseen. We must get rid of protective ignorance. You cannot get away with it in the US, so why here?

That leads me to the point about director disqualification. Section 8 of the Company Directors Disqualification Act 1986 enables the Secretary of State to instigate disqualification procedures in the public interest. These procedures then go to the court to determine whether a director is unfit. This recently expanded scope is a powerful backstop. That is all well and good, but if a company is found to be in breach of serious legislation, why should it need the intervention of the Secretary of State to activate review of the directors? That could be resolved at the time the company is found to be in breach. I do not see why it has to go around the loop of the Secretary of State being tipped off somehow, picking it up and then sending it back to the court, which is the main area that is going to tip the Secretary of State off in the first place. The court has more expertise and would have got a long way towards the answer already.

Section 9A of the Company Directors Disqualification Act, regarding competition policy, already adopts a straight-through consideration of the directors, if that appears appropriate. I cannot see the justification for economic crime being a follow on, always requiring the intervention of the Secretary of State.

12:37

[The Lord Bishop of Oxford]

My Lords, I join other noble Lords in thanking the Government for introducing this Bill. I support it. The Government have led on tackling corruption since the then Prime Minister set the issue of tax transparency at the heart of his G8 summit in 2013. He should also be thanked for hosting the anti-corruption summit in May last year. The Bill follows this good record and takes some further welcome steps to try to tackle corruption. The unexplained wealth orders will provide stronger powers for UK law enforcement to seize and repatriate the proceeds of grand corruption. The new corporate offences of failure to prevent the facilitation of tax evasion should be particularly praised because they will apply all over the world. I hope that in due course these offences will apply to all economic crime.

As bishops, we often travel to our linked dioceses all over the world. The global church is present in many developing countries, where corruption can often be a real problem. Some estimates say, as we have heard, that around $1 trillion annually leaves the developing world in illicit financial flows. That is a scandal. The secrecy enabled by tax havens across the world costs developing countries at least $100 billion a year, according to the UN. Along with other noble Lords, I press the Government to go further and faster in this area for the sake of the very poorest. Until the UK Government go further in tackling the secrecy that is still enabled by UK tax havens, we cannot claim to be doing all we can to tackle corruption. As we have heard, Ministers have made some progress in recent years in getting overseas territories and Crown dependencies to list who owns which company within their jurisdiction, but unless these registers are published—as the UK’s now is—people in developing countries, who are losing out the most, will never be able to see where their money is going.

Christian Aid and other charities have campaigned vigorously on these themes over a number of years. They tell me that a relative of one African president took and spent $38 million of his country’s money on a private jet using an anonymous company in the British Virgin Islands, according to the case against him made by the US Department of Justice. Without a public central register of beneficial ownership in the British Virgin Islands, we would not know what that company is or who benefits from it, and we would have no guarantee that UK law enforcement would be making the right request to get the information needed. Public registers of beneficial ownership will put this information out into the open, and people in developing countries will be able to see the information that is important and relevant to them, which should be their right.

I urge Ministers and others to aim still higher. We should aim to have public registers of beneficial ownership in the UK’s overseas territories, at the same time as getting the private registers in place by June. I shall be supporting noble Lords who try to use this Bill to put in place a timeline for when we will have that transparency.

I urge all noble Lords to reflect on the scale of the problem. Tax havens are costing developing countries at least $100 billion a year, according to the UN. I read a recent statistic that said that around one-third of rich Africans’ wealth is currently held in tax havens. If this money was held in Africa and taxed properly we would be able to employ enough teachers to educate every child on the continent. That is the scale of the problem we are looking at here and the scale of the good that can yet be done. I welcome this Bill and urge Ministers to act while the Bill is in the House of Lords to ensure that these issues are further addressed in this legislation.

12:41

[Lord Flight (Con)]

My Lords, I first declare my interest as in the register, and in particular as director of Metro Bank and as a regulator in Guernsey. I very much echo Dominic Raab’s comments on this Bill in the other place. I want Britain to be a competitive and successful global hub open to international talent, as it has been for 400 years, and I want us to be known the world over for our integrity, our commitment to the rule of law and our adherence to moral principles. We need to stop turning a blind eye to the blood money of despots that may flow all too freely through London and other UK businesses, through banks and into properties. The new sections in Clause 1 are designed to address the weakness in the current UK asset-freezing regime.

I briefly make the point that I do not actually agree that compulsory public registers are going to help with the issue, particularly in Guernsey and Jersey. The law enforcement agencies do not support public registers. David Lewis, head of anti-money-laundering standards in the Financial Action Task Force has made the point that incomplete and unverified public registers are not nearly as useful as law enforcement agencies keeping the right and detailed information. Tax authorities do not support public registers, as they reduce the candour of reporting in central platforms. UK intelligence and law enforcement is a key foreign policy asset, and will be undermined. The proliferation of standards hurts multilateralism, and the OECD reported, when the UK announced its own plan, that,

“proliferation of inconsistent models is in nobody’s interest”.

The most positive organisational aspects of the Bill are the greater contact and interaction that it facilitates among the various entities working in the area, in both public and private sectors. It has been the absence of this to date which is largely responsible for a pretty poor showing in terms of actual success of anti-money-laundering activities.

I support particularly the objective of stronger partnership with the private sector. I am pleased to report that Metro Bank has signed up to be part of the Joint Money Laundering Intelligence Taskforce and I believe that that entity can be much more effective in increasing the volume of discoveries. The BBA will create a register of the business specialities of particular banks and make it available to the Joint Money Laundering Intelligence Taskforce, to bring the relevant experience into JMLIT to work on money laundering and terrorist financing. The BBA, Home Office and Treasury will operate a public private partnership to educate consumers and businesses about the risks of becoming involved in money laundering.

The Bill will create some key new relevant instruments, particularly the unexplained wealth order. The noble Lord, Lord Rooker, raised that issue. It is an extremely important instrument and I believe that huge use will be made of it in the future. Part 3 creates an offence of corporate failure to prevent tax evasion. If the person acting on behalf of a company criminally facilitates a tax evasion offence by another person, that company would be guilty of the offence. There are various other measures which, in the main, will be effective in increasing the volume of money laundering discovered.

However, I have concerns that the additional costs created versus the likely cash recovery will continue to be unsatisfactory. As others have pointed out, the NCA estimates that the amount of money laundered in the UK could be up to £90 billion. In the period 2014-15 the NCA received 381,882 suspicious activity reports, but the amounts of money that have been recovered look pathetically poor. In 2015-16 only £255 million was recovered under the Proceeds of Crime Act. In the whole period between 2010 and 2016, £2 billion was recovered using all powers in the Proceeds of Crime Act. In 2015-16 HMRC secured 1,135 charging decisions and collected £2.7 billion in additional tax and penalties, but that was significantly less than forecast and anticipated. The BBA estimates that its members are now spending £5 billion annually on core financial crime compliance. A lot of that seems to me to be pretty wasted. I accept the problems that are presented, but what is missing are more effective and determined policies to deal with the real criminals.

Let me also raise the issue of PEPs, which is relevant to this House. The Bill defines a PEP as an individual who is or has been entrusted with prominent public functions by an international organisation or by a state other than the UK, another EEA state or a family member of that person. Yet the FCA requires banks to treat domestic UK politicians as PEPs. I would be grateful if the Minister could clarify the law. At a personal level, I was somewhat surprised to discover that the bank where one of my daughters banks was inquiring about her boyfriend’s income as part of a PEP inquiry, arising from my political involvement. That struck me as somewhat inappropriate; the time and effort might have been better spent somewhere else.

The key objective should be to improve the identification of those involved in corruption overseas and the laundering of the proceeds of their crimes in London. That is why collaboration is so important, to enable law enforcement agencies to satisfy demands at the outset of such investigations, given that all the relevant information may be outside the UK. An unexplained wealth order made in relation to a PEP living overseas does not require a suspicion of serious criminality. This should be particularly helpful in cleaning up the UK money laundering activities of corrupt overseas politicians. The Bill also provides for the civil recovery of assets belonging to those involved in or profiting from human rights violations.

As I said, I am concerned that the Bill will add substantially to costs, so it will be important that it achieves a major increase in the amounts recovered from money laundering and terrorist funding activities. I believe that the most useful change will be that of allowing entities within the regulated sector, such as banks, to voluntarily share information on suspected money-laundering activities—subject, that is, to informing the NCA. The private sector holds data on financial transactions and related personal data. The law enforcement agencies hold details of criminals and intelligence on crime. When these data have been shared in the past under the Joint Money Laundering Intelligence Taskforce, there have been positive outcomes for both sectors. Although existing data protection legislation allows for the sharing of information for prevention and detection of crime, regulated companies are understandably concerned that there should be express legal cover directly related to the anti-money-laundering regime to reduce the risk of civil litigation for breach of confidentiality.

It is the Government’s intention that allowing entities to share information should allow so-called super SARs to be submitted to the NCA which would draw on multiple sources of information on suspected money laundering. At present, I feel that the NCA is just weighed down with hundreds of thousands of reports which often amount to little more than many banks protecting themselves.

12:51

[Baroness Whitaker (Lab)]

My Lords, I declare an interest as a member of Transparency International UK and a former member of its advisory council.

I welcome this Bill in general. I simply follow the noble Lord, Lord Flight, with a note of disagreement and a few remarks in support of unexplained wealth orders. These could make considerable inroads into combating the injustice of the enjoyment of the profits of crime, which, as has been said, run into billions of pounds. At present, according to the OECD’s Stolen Asset Recovery initiative, we freeze the equivalent of only $225.5 million a year.

I also commend this proposed measure because, as a civil rather than a criminal provision, it bears on the asset not the individual, and because a High Court judge needs to be satisfied that there are reasonable grounds that the asset has not been lawfully acquired. I agree with TI UK that this accords with human rights obligations.

I welcome the Government’s assurance in the other place that figures on these orders will be included in the annual statistics of asset recovery and that there will be an updated code of practice enjoining co-operation between the agencies concerned. I ask the Minister: which will be the first year for the inclusion of these figures, and when will the code of practice be available?

As my noble friend Lord Rosser said powerfully, echoed by the noble Baroness, Lady Kramer, the right reverend Prelate the Bishop of Oxford and others, among the matters which remain to be dealt with are public registers of beneficial ownership in the overseas territories and Crown dependencies, as well as strengthening the capacity to repatriate seized funds. Can the Minister tell us how the Government propose to pursue the highly desirable obligation to declare beneficial ownership in these tax havens?

Further measures to repatriate the illegal gains looted from developing countries are necessary. This has been a scandal for years. I hope that the Minister can offer us some comfort.

That said, the Bill as a whole will not only improve justice but will enhance to a degree the reputation of the UK as a serious fighter against corruption. I hope that we can enable it to do even more in Committee.

12:54

[Baroness Stern (CB)]

My Lords, I begin by declaring my interest as an officer of the Anti-corruption APPG. My involvement in this Bill arises from my concern about corruption—and I am most grateful to the right reverend Prelate the Bishop of Oxford for his remarks about the effects of corruption in poor countries. I have in past years visited a number of countries where grand corruption has penetrated deeply into the administration. The outcomes are hugely damaging to the majority of people in those countries.

For many, corruption can mean, for example, living through a harsh winter with only a few hours of electricity per day, because the money that should have been invested in the electricity company has gone into a bank account somewhere far away from that country. It can mean many babies dying because there is no money for maternal health services. This can happen in an oil-rich country earning a lot from its oilfields, but where the money that should have gone into mother-and-child health has been diverted by corrupt politicians or officials to banks outside their country. The money is then used to buy penthouses in western capitals, or works of art, or jewellery.

The victims of grand corruption are too many to count. We are debating this Bill because a lot of the money that is not going to the electricity company, or to maternal or child health, is ending up illicitly in banks in the UK and in places such as the overseas territories—places where the UK has a special responsibility. So I warmly welcome the Bill.

Grand corruption is one of the major destabilising forces in the world today. It creates extreme poverty and misery. It deprives millions of education and healthcare that could lead to a fulfilling life. It makes a mockery of the rule of law. It prevents countries from developing healthy economies, and it leads to violence and insecurity. Only last month, Transparency International UK published a report linking corruption to the growth of violent extremism. Grand corruption also stands squarely in the way of the realisation of the United Nations’ sustainable development goals, which we in the UK strongly support.

The Government, and the coalition Government before them, have done a great deal to take corruption seriously. Many examples come to mind, such as: the anti-corruption summit, held in May last year, which was very successful; the introduction of a public register of beneficial ownership in the UK; the appointment of an anti-corruption champion, Sir Eric Pickles MP, who is doing a sterling job; and the Action Plan for Anti-money Laundering and Counter-terrorist Finance, which should bring about real improvements.

Now we have this Bill, which comes to us after receiving cross-party support in the other place for what is in it, and for some things that are not yet in it. There are many important measures in the Bill, as the Minister has explained to us. Strengthening the suspicious activity reports regime is essential. The Magnitsky amendment represents a huge step forward and I was very glad to hear the Minister talk about human rights abuses around the world in this connection. Some argue that grand corruption should be classified as a human rights abuse; I find that argument convincing.

The unexplained wealth orders, which Transparency International has described as a “valuable tool”, are very welcome. It is to be hoped that these orders will make it possible to take action when the prosecution route is not available, either in the country of origin or in this country, because of the complexity of operating in different legal systems.

In this context, the case of Maxim Bakiyev is relevant. He is the son of the overthrown President of Kyrgyzstan. After the overthrow, he sought refuge here and bought a house in Surrey for £3.5 million. He was convicted in absentia in his own country of embezzling millions from the state. I am sure the Minister will know that the Government of Kyrgyzstan are rather disappointed that the United Kingdom has not been able to take any action to help them recover some of the missing millions.

I hope that we can make progress in your Lordships’ House by revisiting the question of public registers of beneficial ownership of companies registered in the overseas territories. There is substantial disappointment in many quarters about the Government’s more cautious approach to moving to transparency and having public registers. The noble Lord, Lord Rosser, made the case for that very strongly. I must read the same newspapers as the noble Lord, Lord Faulks, because I too read about the people who were happy to pay £218,000 to keep their ownership of a property secret. I echo the question posed by the noble Lord: why do we allow this?

Finally, I put on the record comments made by Mr Nick Herbert MP on Report in another place. He was responding to the argument that, although transparency is a good idea in theory, it is not always practical, because if one place has open registers, those looking for a safe haven for a lot of money will choose another haven where secrecy still reigns. He said:

“We are talking about measures that are necessary to protect not just the UK taxpayer but the poorest countries in the world, which are disadvantaged and penalised because people are able to siphon off funds unlawfully and immorally and shelter them in various regimes. We are apparently saying that we are willing to accept that, because if we take action against it, some other regime will perform that immoral task. That seems to me to be a wrong position for the House of Commons to take”.—[Official Report, Commons, 21/2/17; col. 940.]


No doubt we in your Lordships’ House feel the same.

I end by saying to the Minister that she must be very happy today to be responsible for a Bill which has such profound implications, covering huge wealth and grinding poverty, shameless and unimaginable greed, and the heroism of campaigners such as Bill Browder, and which, when implemented, will surely make the world a slightly better place.

13:02

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I begin by drawing the House’s attention to my entry in the register of interests of your Lordships’ House.

It is always a pleasure to follow the noble Baroness, Lady Stern, who, as ever, has introduced an informed and incisive view. Like her, the right reverend Prelate the Bishop of Oxford, who is no longer in his place, had some very valuable things to say about the role of this Bill and its impact on the developing world. In an earlier part of my life, I had a chance to hear a spellbinding lecture by Professor Peter Bauer—later Lord Bauer, a Member of your Lordships’ House. He revolutionised the way the world thought about development economics.

In that lecture he pointed out that, in his view, the single thing that most held back undeveloped countries in achieving their potential was the prevalence of corruption, and that if you could root it out, many countries that suffered from underdevelopment would move forward quite swiftly. It seems to me that what applies to underdeveloped countries has an application in a developed nation such as ours. That is why I instinctively have sympathy with a Bill like the one before us today which has the strategic aim of reducing criminal activity and corruption.

However, I do not believe that that support and sympathy should be slavish. More regulation is not always the answer to every problem because any measure, including measures such as those in the Bill before us, come at a cost—a point raised by my noble friend Lord Flight. I refer not just to the cost of establishing the necessary enforcement powers but to the increased costs for those affected by the regulations.

More worrying for me, however, is that too widespread an approach can include a drag on, or an impeding of, innovation in the development of our financial services. Why is that so important to us in this country? The City of London has become a world financial centre—probably second only to New York in size. Surprisingly, it has achieved this despite being backed by only a medium-sized economy, and the country as a whole has benefited greatly from the City’s success.

That success has had to be based on innovation and acceptance of new ideas. Bigger economies such as that of the US and, increasingly, China can rely on weight of money and the volume of economic activity to carry them forward. The UK cannot. We have to be nimbler, quicker and more entrepreneurial, and being nimbler, quicker and more entrepreneurial is a concept that can worry regulators. Regulators are, appropriately and rightly, risk averse. They can be concerned that novelty automatically hides malfeasance, and thus they block or slow the development of new ideas and new approaches. However, if novelty becomes a dirty, suspicious word, the City and the country will be the long-term losers.

To summarise what I see as the dilemma, on the one hand, too low a standard of behaviour damages the City’s reputation and drives business away; on the other hand, an unreasonably high bar drives businesses away because of the costs, problems and time taken to complete transactions, and the unwillingness to adopt new ways of working. That seems to be the delicate balance we have to strike when we look at proposals such as those in this Bill.

Therefore, as we go to the Committee stage of a Bill whose strategic aims I entirely endorse, the test that I wish to apply is: will what we are proposing encourage good standards of behaviour, or merely mindless compliance whereby forms are filled and boxes ticked?

I turn to a couple of provisions of the Bill, both of which have already been mentioned, so I shall be very brief. First, I support the proposal of unexplained wealth orders and I thank the Minister for her further explanation in her opening remarks. My noble friend Lord Faulks raised a couple of points about them, and I was interested in receiving the White Collar Crime Centre report, which suggests that the enforcement of UWOs will present challenges. Where state officials and politically exposed persons are concerned—two categories that are particularly in the target zone for UWOs—it will be hard to prosecute because of what the White Collar Crime Centre calls “personal immunity” and “financial immunity”. I look forward to hearing in the wind-up or in Committee how those two immunities will work, and whether they will have implications for or impede the way this provision is used. As my noble friend Lord Faulks said, we shall need to look at the Australian and Irish experiences to date.

My second question about the Bill concerns the overseas territories. A number of noble Lords, including the noble Lord, Lord Rosser, raised this in his opening comments. We have a particular responsibility in this country. White collar crime is very flexible: it is like a balloon—you squeeze it in one place and the air pops out somewhere else. Therefore, we have to explore our links with our overseas territories and Crown dependencies. I look forward to hearing the views of other people, because I am not sure that we have the situation quite right yet, and the noble Lord, Lord Rosser, obviously has some important points to make about that.

For the rest of my speech I want to return to the idea that new regulation should be formed to encourage quality behaviour and not mindless compliance. I do so because I firmly believe that it is only by engaging the widest possible range of people in the fight against criminal financing that we can ultimately hope to have a high degree of success. It is interesting to note that when Security Service chiefs talk about their successes, they always emphasise how much they have benefited from the notifications that have come from members of the public.

I regret to say that I do not think that the authorities responsible for the detection of criminal financing have so far managed to engage the interest and support of the public—particularly those who work in the City—in the same way. Why is this? First, it is because many people believe that the existing regulations, both on money laundering and SARs, gather together a vast mass of data—much of which is irrelevant—which the public believe is then put in a file and never examined. They have no reason to believe the contrary. I hope the Government and the authorities will develop a regime which encourages the use of the precision of a rifle shot, not the blunderbuss approach of a shot-gun. Under that regime, the authorities should connect better with the general public about their objectives and how they are being achieved.

Secondly, there are concerns among the public about effectiveness and the value for money that the present regime provides. Regulators always seek more powers, usually with more money to enforce them. We need to be careful to ensure that, before more powers are granted, all existing powers are being used effectively. I was interested to note that at Second Reading, Sir Edward Garnier, the Member for Harborough and an experienced lawyer, said:

“I have noticed that in the past with confiscation orders. Very often, the courts make an order, and either the order is never put into action or very little of the amount required from the offender is ever recovered”.—[Official Report, Commons, 25/10/16; col. 208.]


Is this true and, if so, what are the statistics? Is the Minister confident that other existing powers are being fully used?

Finally, I turn to the point made by the noble Lord, Lord Brown of Eaton-under-Heywood. In 2015-16—the last full year for which figures are available—the National Crime Agency, which cost £478 million to run, seized £26.9 million of assets. Am I alone in feeling that, when billions of pounds are supposed to be passing through the City of London, that is not an adequate performance? There are some 27 different bodies engaged in this, so it would be helpful if, before Committee, the Minister could give noble Lords a little schedule of each body’s costs and asset recovery in the last year for which figures are available. I support the Bill, but we need to make sure we are creating an effective, lean crime-fighting machine and not just adding to the bureaucracy.

13:12

[Lord Watson of Invergowrie (Lab)]

My Lords, I start by apologising to the Minister for the discourtesy of missing the first minute of her speech. I was in the Library and the Bill started too quickly for me.

The Bill is certainly a step in the right direction to strengthen the capacity of the UK’s law enforcement agencies to address dirty money, whether it is connected to corruption, money laundering, tax evasion or terrorist financing. In particular, I am happy to support measures such as the unexplained wealth orders and the new corporate offence of failure to prevent tax evasion. The Bill highlights why the integrity of the UK’s financial system is so important. This goes to heart of the UK’s global reputation for its commitment to clean business and fair play, and of public confidence in business and corporate behaviour domestically.

I was pleased to hear the Minister echoing the Minister for Security, Ben Wallace, who remarked, at Second Reading in the other place, that the Government’s aim is,

“to combat money laundering, terrorist finance and corruption—here and overseas”.—[Official Report, Commons, 25/10/16; col. 195.]

That is most welcome but, rather like the Bill itself, the Ministers did not go far enough. The elephant in the room with this Bill is the overseas territories. The Government are not doing enough to persuade them to adopt public central registers of beneficial ownership. Why has the Government’s stance on this weakened during the passage of this legislation?

My noble friend Lord Rosser highlighted the pathetically weak wording in the letter sent by the Minister to noble Lords this week. For those who have it to hand, it was the third paragraph from the end. I will not repeat his critique, but the Government simply have to do better on the overseas territories. We all know that they will not voluntarily take meaningful action on transparency. Requiring transparency in the overseas territories would be one of the most effective things the Government could do to tackle corruption and money laundering.

Introducing provisions for public registers of beneficial ownership in the overseas territories would fulfil the Government’s stated aims and support the measures in the Bill. I was pleased to note the cross-party support on this on Report in the other place. It was led by the All-Party Group on Responsible Tax with the support of a large number of NGOs. The All-Party Group on Anti-Corruption—I declare an interest as its vice-chair—also supported and continues to support campaigning on this issue.

I acknowledge that there are some constitutional and jurisdictional sensitivities as far as the overseas territories are concerned, but that is not a reason to delay meaningful action in this area. Progress has already been made with some private registers, allowing information sharing between law enforcement agencies. That is welcome, but the wider, and crucially important, issue of the need for public registers cannot be overstated. I urge the Minister to commit to a deadline by which we can expect to see public registers of beneficial ownership in the overseas territories in place and operating. I also urge the Government to continue their dialogue with the territories and to support them in achieving this objective.

There is a strong, responsible business case for transparency on beneficial ownership at a public level. Companies carrying out due diligence need access to this information so they can be confident that they know who they are doing business with. This supports sound, clean, competitive business practice. A survey of companies in 2016, conducted by Ernst & Young, showed that 91% of respondents believe it is important to know the ultimate beneficial ownership of the entities with which they do business. The only surprise about that outcome was that 9% apparently believe it is not important—and we can only speculate as to who they might have been. Transparency on beneficial ownership is also really important for developing countries, where illicit financial flows, often channelled through anonymous companies, have a significant and damaging impact, leading to the loss of millions of pounds needed for schools, hospitals and other public services.

Other noble Lords have referred to this matter, but it is a powerful argument for registers of beneficial ownership being made public. Developing countries and their civil society organisations must have access to the information needed to combat the vast amounts of money siphoned off by corrupt politicians or officials and redirected to private foreign bank accounts. The UK needs to remain a leader on this issue, ideally in partnership with other members of the G20. Under David Cameron, the UK forged a leading role in tackling corruption and criminal financial activity. I am not usually one of his cheerleaders, but by hosting the anti-corruption summit last May he sent a clear message that his Government were serious about the issue—and not just on a global scale. He also believed that it was essential that the UK should shed its image as a major repository for dirty money.

I also want to focus on the importance of bringing the law on corporate liability for economic crime up to date with current business practices and structures. The noble Lord, Lord Faulks, mentioned his experience as a Minister in respect of overseas territories and Crown dependencies—but, regrettably, he had nothing to say on corporate liability. Noble Lords will be aware that the Ministry of Justice’s call for evidence is currently open on this issue. That is welcome, but it represents a rather timid approach by the Government, because one commitment of the anti-corruption summit was a full consultation on corporate liability. Perhaps the Minister will announce that the intention is to move on to that—and, I hope, ultimately to legislative reform.

We can no longer tolerate Victorian era law which means that large companies can insulate themselves from liability via evasive internal structures enabled by their size and complexity, while small companies have fewer places—or perhaps just fewer people—to hide and thus are more likely to be prosecuted. That does not accord with the Government’s stated commitment to a level playing field and fair competition. This must operate not just internationally but domestically as well.

This also goes towards protecting the UK’s reputation as a key financial centre. I will quote another Tory now. Sir Edward Garnier stated in the other place last month that the UK’s global reputation was connected to our financial services industry. He was right: companies in that sector, and their employees, need to know that there is a real risk of a criminal conviction if they step beyond the line of honesty and acceptable behaviour. I do not see this as an area in which regulatory oversight and fines should be the sole means by which we address corporate malfeasance. There should of course be a role for regulators, but there needs to be more. It is widely understood that companies can and do plan contingencies for fines into their budgets. That is no disincentive to criminal activity—or even to just looking the other way, which can amount to the same thing.

The key point is that companies must abide by, and act in accordance with, the values of the society of which they are part. Free market economics often exists in a universe parallel to the power imbalances and social norms of society that it helps to perpetuate. Most people want business to be open and fair, with genuinely deterrent sanctions for those who feel that the rules do not apply to them and that they can get away with it. A vibrant but openly honest financial services industry is vital to build and maintain public trust in UK business, both at home and abroad.

My closing point is that public registers of beneficial ownership in the overseas territories and reform of corporate liability for economic crime are very reasonable additions that would complement the valuable measures already set out in the Bill.

13:20

[Lord Thomas of Gresford (LD)]

My Lords, I welcome the Bill generally but in particular the provision in Clause 15, which inserts a new Section 303Z5 into POCA, giving the court the power to release frozen funds to pay legal expenses. That was a matter I argued many times in this Chamber, particularly during the coalition Government when there was a reduction in legal aid generally. At about that time I had a wealthy client whose assets were frozen and consequently he had legal aid. At the end of the trial, when he was acquitted, he was awarded his costs but, as legal aid had paid his legal team, all he had to pay for were the parking charges for his Rolls-Royce, which he had parked a mile away from the court in case it influenced the jury.

Money-laundering legislation has had a major impact—for business, the cost and time of introducing systems; for individuals, the struggle to prove identity. It is quite something when you have to produce a utility bill not less than a month old to prove who you are to a bank where you have been a customer since the age of 15. You wonder where all this information goes. What happens to it? Who deals with it? Yet, at the same time, as the noble Lord, Lord Hodgson, pointed out, there is a general feeling that prosecutions do not match the considerable efforts and discomforts that we have to suffer. As the noble Lord, Lord Flight, pointed out, compliance is not cheap—£5 billion annually is the cost assessed by the British Bankers’ Association for the way in which banks have to deal with core financial crime.

My experience of the POCA proceedings which occur when a trial is over has not been satisfactory because they are lengthy and complex. I have not been involved in many because, as usual, experts jumped up to capture the market in such proceedings. The reversal of the burden of proof, with the defendant having to prove where the assets came from, was not satisfactory because the trial judge was almost certainly bound by the view of the jury of the facts and the veracity of the defendant. So, from that point of view, it is not a fair procedure.

As the noble and learned Lord, Lord Brown of Eaton-under-Haywood, and the noble Lords, Lord Flight and Lord Hodgson, have pointed out, the figures are not very satisfactory for recovery. They have commented on various years and I will comment on 2014-15 for additional reasons, which I shall point out. In that year, the agency collected £155 million; the National Audit Office reckoned that the cost of collection was £100 million; but—this is the important figure—the confiscation orders made by the courts that were outstanding was £1.61 billion. I call that failure, and the Bill may go a long way towards rectifying the failure that has existed so far.

I was pleased to hear from the noble Baroness, Lady Whitaker, who is a distinguished member of the board of Transparency International. A task force examined the efficacy of money-laundering controls in this country in May 2015 and it came up with important and key findings: first, that the levels of asset recovery in the UK are small compared with the likely amounts of corrupt wealth being laundered; secondly, that only a small minority of suspicious activity reports, SARs, relating to grand corruption are acted on by law enforcement agencies; and, thirdly, that the timeframe moratorium period of 31 days for responding to SARs is generally inadequate to investigate and achieve asset restraint for grand corruption cases.

In July 2016 the Home Affairs Committee was shocked when it heard oral evidence from Robert Barrington, the executive director of Transparency International UK, who said that,

“it seems likely that in terms of money laundering going through the UK system every year, it is at least £100 billion”.

We are always talking about the corruption in Panama, but the committee pointed out that in Panama £100 billion is twice the size of its entire economy. So, given the amount of money passing through the UK system, we are much more involved in money laundering than Panama.

A number of noble Lords, including the noble Lord, Lord Rosser, my noble friend Lady Kramer, and the noble Lord, Lord Watson, a moment ago, underlined another of Transparency International’s conclusions. Mr Barrington said:

“Clearly one of the things that makes the UK attractive as a centre for money laundering is its historic links with the Overseas Territories and Crown Dependencies, because you can move money very quickly to jurisdictions that are very well-linked and for whom your bank of lawyers and accountants will have very close connections and can easily set up shell companies and so on”.


I was interested in what the noble Lord, Lord Faulks, said about that. He believes that legislation is going through the Crown dependencies but I wonder what is happening with the overseas territories.

On the question of corporate liability, the Government are following Section 7 of the Bribery Act 2010. I was involved in the Select Committee that looked at that Bill and afterwards when the legislation went through. I was later asked to give a talk in the premises of a well-known firm of solicitors to some very important clients about the effects of the Bribery Act. I was so shocked to hear other speakers winding up these companies about the amount of compliance that would be required that I thought it necessary to say, “Look, you are not all going to go to prison immediately”. Indeed, of course, under the Bribery Act there is not such a liability as they were saying at that time.

I was at a dinner last night in Threadneedle Street—not a place I go to frequently—where I was sitting next to a young lady who is involved in asset management. She said that the department in her company that is expanding without any obvious horizon is the compliance department. I can see that compliance departments will expand in all these companies and that lawyers will have a new industry of advising people on this Bill which is an effect of the Bill that I would not like to see.

There is much to discuss. The thrust of the Bill is right and I hope that we can refine it in certain important areas.

13:28

[Lord Dear (CB)]

My Lords, coming in to bat as late as I am in a debate like this, almost everything I wanted to say has already been said. I shall try to be brief but my brevity does not signify any lack of sincerity or support for the Bill. I welcome it warmly, as I have made known before.

In the 1990s I was HM Inspector of Constabulary, carrying at that time a special responsibility to satisfy the Home Secretary of the day about police activity against organised crime and money laundering—was it adequate? At that time I found that the response to arrests was reasonably good but the response to the recovery of cash was downright poor. All too often those at the top of the criminal tree were getting off scot free. They were not being arrested or inconvenienced, and certainly none of their assets was being recovered. In other words, if you got to that position, life was something like a bed of roses. The amounts then, much exaggerated now, were eye-watering—absolutely staggering amounts of cash, of property, of assets and of works of art. To have seen the product of some of those investigations and listened to some of the intercepts from deep-cover operations showed to me—and I thought I knew everything about it—just how deeply rooted this was. The 2013 Act has gone a long way towards improving that 1990s position, but there is no doubt—and it has been implicit in everything that we have said so far—that the very top end of crime, which we are concerned with in this debate today, is all about status, power, hedonism, violence and cash. If you take the cash away, most of the rest falls away, almost into insignificance. It is quite clear that this Bill has almost universal approval; there is nothing very contentious in it except perhaps to criminals, and we are not too concerned about them in the sense that we have been debating today.

One of the things that will clearly develop from this is the much closer working relationship between HMRC and other agencies, and properly handled that is to be welcomed. I will not go into some of the particular things that interest me in the Bill: unexplained wealth orders, which have been mentioned already, the much-strengthened investigatory powers against fraud and money laundering, and the improved facilities for helping SARs—suspicious activity reports. After I came to your Lordships’ House 11 years ago, I very shortly joined the Home Affairs Select Committee. We carried out an in-depth, searching inquiry into money laundering and its effects. One of the things we looked at was the way in which SARs were being handled, and even then they were handled very well. We spent a fascinating day at the London offices looking at the way in which the huge amount of information from all the various agencies and bodies was collected. They said, “We put so much in, they can’t possibly look at it”. In fact, there was a great deal going in. What was really becoming apparent was that it was being computerised in a very sophisticated way and whole patterns of criminality were being developed, leading one very quickly to see who was involved and where the money was going.

This clearly will help drive down crime. Although we have not mentioned it much today, it would certainly help to slow down, if not stop, terrorist funding. I say, not jocularly, that the days of terrorists rattling tins for collections in central European cafés have very long gone—they disappeared before the First World War. Terrorists now are highly sophisticated in the way they draw down the funds for operations.

I want to mention just three things. The first was touched on by the previous speaker, the noble Lord, Lord Thomas of Gresford, just before he sat down. He is quite right: we have a very poor record in recovery of assets. We talk about large sums but, in proportion, they are very small. Law enforcement has to start supporting this legislation and I hope it will be encouraged—if not encouraged, certainly pushed very hard—to do so. The root of that is that the law-enforcing agencies—certainly police and others working similarly close to them—are judged on what are called “results”, and the results are arrests: “Get the person into custody and before the court. We know we need to chase the stolen property and need to chase the assets, but we are too busy because we have other things coming up and we are being judged on results”. That has to change quite considerably.

We have heard this very hackneyed story about the way the FBI, during the prohibition era in America, took down very high-level criminals by using tax-evasion legislation. That is very close and in parallel to this legislation. I hope to forecast confidently that through the use of this legislation we will move away, in selected cases, from chasing the criminal through the criminal courts and simply go for the asset. The damage it does to him—or her, but usually him—and his organisation is massive and total. Chasing to try and get the conviction is often counterproductive.

I gloss over the second thing very quickly, although I feel very strongly about it. We have heard a great deal about the overseas territories and the Crown dependencies and I agree with everything that has been said. I certainly support public registers of beneficial ownership.

The third thing we have brushed on very briefly in this debate is Bill Browder’s book Red Notice, which I too have read. For those of your Lordships who are still not sure, the book is about Sergei Magnitsky’s death, which led to the Sergei Magnitsky Rule of Law Accountability Act 2012 in the USA. He was a lawyer who stood up against high-level corruption and money laundering in Russia. He was arrested and, in custody, was tortured over a long period and then beaten to death. Browder then pursued his case for many years, eventually getting that Act that I have just mentioned on to the statutory book in America. It is all about human rights abuse and money laundering, and preventing those contributing to that from getting visas to go into the United States. The big thing is about freezing their assets wherever they could be frozen—certainly in the USA. There have been various unforeseen consequences on that; it is a very delicate situation and the Act led to a tit-for-tat war between Russia and the USA, and one has to watch that very closely. Notwithstanding that, the thought of being able to draw human rights abuse and money laundering into this Act in this way has much to commend it for, so my heart and sense of direction supports that.

I repeat, in conclusion, that the Bill has my very warm support—it is very-long awaited and I welcome it. I am confident that it should have a profound effect in the areas we are discussing: humanitarian, social, counterterrorism and so on. I will certainly do my best to assist its passage through your Lordships’ House.

13:36

[Lord Patten (Con)]

My Lords, the UK, generally with all-party support, has an excellent leadership role internationally in efforts to combat financial crime and the terrorism that all too often feeds of it. For example, landmark measures were brought forward by the Labour Government. I would pick the then Bribery Bill, introduced in another place in 2009 by Jack Straw. That was a landmark on which much later policy has been developed, helping conceptually in the lead-up to the Bill before us. That steady, all-party drumbeat of support has brought me into very happy coalition with, for example, Diane Abbott, the shadow Home Secretary in another place. One finds these coalitions spring up in the most unlikely way. I also know the noble Lord, Lord Rooker, will take me seriously when I say that I join his coalition on kleptocracy in London, not just because of the money laundering that is probably involved, but because of the devastating effect it has on the occupancy of properties in so many London boroughs. Hear, hear to everything he has said.

Like the noble Lord, Lord Dear, I welcome so many of the provisions and tools made available by the Bill, such as the new unexplained wealth orders and the developing suspicious activity reports. There is nothing for any decent, honest person, foreign or British, to worry about in these. These provisions started in the Proceeds of Crime Act 2002—I spell it out in full to avoid the POCA/poker linguistic dilemma that my noble friend Lord Faulks pointed out. These have worked very well. In particular, I welcome the bringing together of public and private information sharing in a proper, public/private partnership against financial crime. This has not been noted thus far, but I think this is an international first, so the data held by UK law enforcement agencies can be brought together with that held by regulated entities in the private sector undertaken by banks and so on. This will help us in combating money laundering. It is certainly an international first and an approach that should be followed throughout in the battle against the ever mutating cybercrime, which is one of the biggest threats to international economic and indeed social peace on the globe.

That is all good macro stuff and I warmly support the Bill, as I guess my noble friend the Minister has noticed, but I would like to move from the macro to the micro picture and to a legislative dog in this context which has yet to bark, and I hope will not even whimper. I seek confirmation that there is no intention on the part of HMG to introduce provisions that would impose legislation in this or in any other way directly from Westminster on to Gibraltar. I hasten to make, as it were, a declaration of non-interest in this matter. I have no financial interests in Gibraltar and I do not intend to have any. My wife and I simply ended up there on a short holiday, but I was rather taken by the little place and that has subsequently spurred an interest in and contempt for the persistent, disgraceful and costly incursions by Spanish state vessels into our territorial waters there.

Financial services, in which, like others in this House, I have interests in and knowledge of here in the United Kingdom, have flourished in Gibraltar. I have gone into the matter in a little detail and I think that they are based on very high regulatory standards. It is my understanding that the relevant UK departments are content with the present arrangements. Indeed, back in December 2016 my right honourable friend the Prime Minister stressed this in the House of Commons following an exchange of notes between us and Gibraltar saying that we are content with the current arrangements and that the UK’s law enforcement objectives are being met. I believe that that has been confirmed by my noble friend Lady Anelay at the Foreign and Commonwealth Office.

Setting aside the undoubted legislative can of worms that would be opened by seeking for the first time to impose legislation from Westminster, and thus setting a precedent for those who have unfriendly feelings towards that little place and therefore could use it in a malign way, I stress that a great deal has gone on lately. Gibraltar has set up a register of beneficial ownership under the terms of the fourth anti-money laundering directive. This builds on Gibraltar’s record of effectiveness in the exchange of information. Indeed, the OECD has recognised that, admittedly using a phrase that is not a ringing endorsement, in a recent review and has classed Gibraltar with the UK, the US and Germany in the top category known as—they do not like to overspeak in the OECD—“largely compliant”, so Gibraltar is there with those other countries.

I simply seek a reconfirmation from my noble friend on the Front Bench, if confirmation is needed, that HMG have no intention of allowing the provisions of this Bill to extend by default to Gibraltar with its entirely independent legislative arrangements, curious though they are. If my noble friend does not have time to address this point during her wind-up remarks, I will fully understand. She may choose to write to me and place a copy of that letter in the Library of the House.

13:43

[Lord Anderson of Swansea (Lab)]

My Lords, like my noble friend Lord Watson I begin with an apology to the Minister. I had assumed that there was more substance in the earlier business and so I arrived only when she had already embarked on her speech. I welcome the Bill and I would make one preliminary proposition, which is that the strength of our credibility as a country in the field of tackling criminal finances will be much enhanced if we have clean hands. I believe that we do and that we are leaders in this field. Nevertheless, as the figures shared by a number of speakers have shown, including those referred to by the noble Lord, Lord Faulks, crime has paid. Asset recovery has been relatively small and sometimes attempts must be made against the wiles of clever lawyers and accountants to gain back as much money as we can. For example, there is still a suspicion that London is one of the centres in which international criminals find it easy to launder their money.

While much has been done about the London property market, as the noble Lord, Lord Faulks, pointed out, there are areas where the lights are always off. Let us think of a not too hypothetical example whereby a foreign individual buys several properties without even bothering to look at them and says that he is not going to live in them. I can give the noble Lord details of particular properties. Who is to blame for that? Should the estate agent tell the Government, or the accountants or the bankers? These are not hypothetical cases and they have national implications because they affect property prices right down the chain and are therefore of considerable public interest. There are many areas in which alarm bells should be sounded, but who will ring them? I therefore ask the Government again if they are satisfied that, even after the passage of this Bill, the instruments will be available to ensure that crime will not, as it has in the past, pay.

I have two further brief observations to make. The noble Lord, Lord Patten, has anticipated my comments in respect of Gibraltar. What is clear is that following the exchange of notes in April last year, the Government and those who had initially proposed amendments in the other place and then withdrew them are now satisfied. However, we need to look at this carefully. My noble friend Lord Rosser pointed out the revelations in the British Virgin Islands as set out in the Panama Papers. Surely there are lessons to be learned from that lax matter. I understand the constitutional position of Gibraltar, which has just been made clear by the noble Lord, Lord Patten. Gibraltar is fully compliant with current EU and OECD law, but I hope the Government will pledge to work as hard as they can to ensure that there is a public register—even though I heard a colleague say that the tax authorities and agencies are not pressing for public registers, fearing that the amount disclosed will be rather less than they currently receive.

My main point, however, relates to the so-called Magnitsky provision set out in Chapter 3, Clause 12, which will put in place freezing orders based on human rights abuses. Of course, there are key differences between this and the US legislation, but both have been triggered by the same outrage. I first came across this issue in 2013 at the Parliamentary Assembly of the Council of Europe. The background is well known. The noble Lord, Lord Dear, pointed out the full detail so I need not reiterate what he said so well. It concerned a massive fraud against the Russian tax authorities. Astonishingly, Mr Magnitsky was himself posthumously found guilty of fraud, and no prosecutions have been brought against the prison authorities responsible for the beatings and torture or those who benefited from the fraud, such as the former head of the Moscow tax office, Olga Stepanova, through whom the majority of the relevant fraudulent tax reimbursements were made. Funds from the fraudulent transactions were traced to her ex-husband. He and two of his deputies bought properties in Dubai shortly after the fraudulent refunds. It would be helpful if the Minister indicated the latest stage of the paper trail and said whether she was satisfied that no part of it leads to London, contrary to the assertions of Mr Bill Browder. I successfully moved an amendment to the resolution in the Council of Europe encouraging member states to follow the US lead, and I am delighted that we are now broadly doing so.

This is perhaps not the time to dwell on the Russian system of government because we have to work together in many fields. However, let us think of Alexander Litvinenko, the recent conspiracy against the Government of Montenegro and the doping scandal at the Olympics, although the latter shows that sanctions do in fact pay. All of these lift the lid on aspects of the Russian system. Therefore, the inclusion of Clause 12 is most welcome. The background, of course, is the campaign by the indefatigable Bill Browder of Hermitage Capital, but I must also praise Dominic Raab, the all-party group in the other place and, perhaps most of all, the Minister, Ben Wallace. There was clearly careful preparation for the debate on 21 February, which is well worth reading. The result is a welcome attempt to deal with abusers of human rights and torturers worldwide, which is a major step forward.

A number of concerns were expressed: about the exclusion of a visa ban, about the short term of the 20-year limitation and when it begins to run, and about the question of enforcement. However, the Minister was most positive and forthcoming in this respect, giving a commitment to a review and annual reporting. I therefore congratulate all concerned. I say again, the debate in the other place is well worth reading. The history of this clause shows Parliament at its best, working consensually and constructively to a very positive outcome.

13:51

[Lord James of Blackheath (Con)]

My Lords, I am deeply grateful to be allowed four minutes in the gap to comment on this very important Bill. The Minister is already aware, from our correspondence, of the thrust of my main concern, which is that the Bill does not do anything adequately at this stage to encompass and force the disclosure of the vast amount of information that, for reasons of either negligence or complicity, becomes available to executive structures within companies that have discovered things that ought not to have been done and which they ought to own up to and show.

I will give two examples of how and where this has occurred. In 1986, I went with a certain Dr David Kelly to the head office of Lloyds Bank in the Midlands district in order to inspect the paperwork it had for the payment arrangements for the Iraqi supergun. The papers had been set out by the local director. After about 10 minutes, he turned to Dr Kelly and said, “While you’re here, would you like to see the payment arrangements we’ve got for the manufacture of capacitors for the Iranian nuclear bomb development?”. Yes, he would. So the papers were produced and the whole of this was put into the hands of our senior military intelligence operation at that time. How on earth can that occur in a reputable bank, with an FT top 500 company manufacturing these extremely sensitive components for a very large sum of money? Whatever happened to end-user certificates? That ought to be somewhere in this Bill.

The other example is much more of commercial negligence and complicity. I was put into a company, again by the Bank of England, to try to sort out its horrendous problems. It was a specialist in manufacturing turnkey operations for industrial units to be built in foreign countries, and its main client was Libya. It was building a cola bottling operation at Aziziya, and the total cost at the end, when we sent the final invoice, was set at £126 million. There was no problem getting paid because the next day we got £128 million back. I said, “Send back the £2 million surplus immediately. We don’t want it”. My new colleagues—I had only just joined—said, “No, no, we have to keep it”. I said, “Why?”. They said, “If we don’t, we’ll never get another deal in Libya”. I said, “What’s it all about?”. What it is all about is that they want that £2 million to be used to open bank accounts in Naples and Rome, and they are providing all the details of how this is to be done. When I go back into the records, I find that they have already opened five bank accounts along the Mediterranean coastline for similar sums in the past. It is only on that condition that they get the business. In those circumstances, they claimed that they had done it for commercial reasons and would not have got the business otherwise. They were probably right, but somebody else would have done. That money is just being used for the availability of a turnkey operation for anybody to walk into Rome, and £200,000 buys you an RPG—a rocket-propelled grenade—that gets rid of a Popemobile at 180 yards very securely.

We need to stamp out this sort of thing and we need a wholly new set of standards for the disclosure of information that may be thought innocent or accidental but is not. There is so much of it. I have given noble Lords two examples but I could give a great many more. It is an outrage with a Bill as important as this if we do not crunch this once and for all. I thank noble Lords for my four minutes.

13:55

[Baroness Hamwee (LD)]

My Lords, when I first looked at this Bill, the first word I wrote down was “privacy”—which may be a legacy of recent Home Office Bills. Then I wrote down “housing market London” and then “reputation”. My noble friend Lady Bowles referred to the fundamental agreement with society. The noble Lord, Lord Hodgson, reminded us—picking up points made by my noble friend Lord Thomas of Gresford—of the importance of engaging the public without the deterrence of bureaucracy, which I am not alone in the Chamber in having suffered from. I should perhaps have first written “transparency”, which goes hand in hand with—I stress this—the accessibility of information, because the antithesis of transparency is not privacy but secrecy. So I will not be defensive if, from time to time during the passage of the Bill, I apply in a moderate way the lens of privacy.

What might seem, at first sight, a rather dry subject on only a very little reading turns out to be the stuff of a page-turning thriller—possibly accompanied by coffee and Sachertorte, as the noble Lord, Lord Dear, reminded us, as lunchtime comes and goes. Sadly, it is not fiction that apparently more than £100 billion of dirty money goes through the UK system each year, so far as one can tell—ironically, as my noble friend said, equivalent to twice the size of Panama’s economy.

The criminality that is the subject of the Bill does very real damage to the UK’s reputation and to individuals. The noble Baroness, Lady Stern, referred to the penetration of grand corruption and gave your Lordships a very vivid picture of the impact of corruption. The noble Baroness, Lady Whitaker, referred to the importance of the restoration of funds. We have been briefed by organisations outside this House on the evidence of the cost to developing countries of corruption and of the use of tax havens.

Of course, it is all around us. You do not have to go on a kleptocracy tour to see it in London. Transparency International said:

“For those in possession of corrupt funds, a property in the UK can provide a secure investment, but also help bestow prestige, respectability and a bolthole when the going gets rough at home. Most importantly, property in the UK can be acquired anonymously through companies registered in secrecy jurisdictions and anti-money laundering checks can be bypassed with relative ease”.


That is a pretty quick canter through many of the issues that this Bill gives rise to—one could quote very much more from Transparency International on this subject.

I resent, on behalf of those who struggle to find housing in London and those who are affected, perhaps slightly less directly but still pretty directly, by corruption, the fact that property in my city is available to corrupt individuals. There are some developers at the high end who are selling London. I welcome the steps taken to tackle the situation. I dare say that, from these Benches, we will be pressing the Government for more, while also unpacking how appropriate and effective the measures in the Bill will be. Some of this will be detail, but important detail. For instance, is £100,000 the right threshold for unexplained wealth orders? How big should be the identifiable tip of a possibly very substantial iceberg?

The noble Lord, Lord Faulks, referred to safeguards. I am sure that we will want to satisfy ourselves about those. I confess to feeling a little discomfort, which perhaps in the context is inappropriate, about a civil rather than a criminal standard of proof applying in this area. No suspicion is required in the case of a non-UK or EEA politically exposed person. That is a hook on which to ask about progress on the definition of PEPs domestically, possibly in writing, after this debate. My noble friend Lady Kramer alerted me to the possibility of guidance being given by the FCA, I think, under the recent Bank of England and Financial Services Act. It is quite clear that there are issues around domestic PEPs.

Like everything else, new legislation depends on enforcement. Would it be indelicate to inquire whether the Minister wants to say anything on the sharing of information and co-operation with other EU states, post Brexit? There are 27 states, of course, like the 27 fragmented supervisors who have been referred to. Comments have been made about the number of SARs now; quantity can hinder effectiveness. One must worry about the NCA’s capacity to deal with super SARs, though I note the reference of the noble Lord, Lord Dear, to the description of systems that are in use.

I am anxious about the extension of seizure and forfeiture powers, but not perhaps as the Minister may expect. Why extend them only to specified items? I appreciate that the list of items in question can be extended, but why not to all items now—certainly all items of personal property, if not real property, such as land?

I noted the extension elsewhere in the Bill of powers to immigration officers, which will take my noble friend Lord Paddick and me back to comments we have made on previous legislation about the disappearing distinction between immigration officers and the police. We may also want to probe a little on the supervision and powers of civilian counterterrorist investigators. My noble friend Lord Sharkey, who cannot be here today but will, I know, join us at a later stage, wants to probe the operation of deferred prosecutions and will have suggestions about money being held in escrow until the agreed sum is paid, given the problems of collection of cash—because it seems that pockets and wallets are sensitive to depletion in a way that, apparently, deprivation of liberty cannot match. Prison seems to be merely an occupational hazard to some people.

I mentioned the damage to individuals. Corruption and the infringement of human rights go hand in hand. I welcome the Magnitsky amendment. The Joint Committee on Human Rights, of which I am a member, commented on the issue. The committee is currently looking at business and human rights, including issues of strict liability, civil remedies and reporting and transparency. There is quite a lot of read-across here.

My noble friend Lady Kramer rightly mentioned the issue of whistleblowing, while the noble Baroness, Lady Bowles, the noble Lord, Lord Watson, and others mentioned corporate liability—but I will come back to where I started, with transparency. There is a clear will to spend some time in Committee on the implementation of public registers of beneficial owners in British overseas territories. It was the focus of the speech of the noble Lord, Lord Rosser, though we heard a contrary view. The UK has led the way and we have heard about steps being taken elsewhere in the European Union. Let us acknowledge that Montserrat has committed itself to introducing a register, though we do not know when, and use our influence—or, if necessary, power—over what are, after all, British overseas territories: further and faster, as the right reverend Prelate said.

The term “open for business” is used quite a lot at the moment, in the context of the UK being open for business. None of us wants to be open for the business of being used as somewhere to bleach some very dirty laundry.

14:05

[Lord Kennedy of Southwark (Lab)]

My Lords, at the outset of my remarks I am pleased, like my noble friend Lord Rosser, to put on record that Her Majesty’s Official Opposition support the aims of this legislation. We will seek, as we always do, to probe, strengthen and improve the legislation that has come before us from the other place so that the Bill goes back there in better shape than when it arrived here.

Both serious organised crime and terrorism pose real and present dangers to the United Kingdom, and it is our job to ensure we pass laws that are fit for purpose and provide the law enforcement and other agencies with the tools they need to do their important job of keeping the United Kingdom, its citizens and all the people living here safe and protected from danger.

Noble Lords will have heard the figure of £24 billion, which is the estimate of what serious criminality costs the UK economy each year. I agree with what the noble Lord, Lord Faulks, said about the cost to the UK. It is a huge sum of money and with it go lives destroyed, communities ruined and real hurt to our economy. It is everything from the vulnerable person being ripped off on the phone by con artists—losing thousands of pounds, possibly every penny they have—to tax evasion, the evil trade in drugs, prostitution, slavery and firearms. It is our duty to do everything possible to disrupt the activities of criminals, to stop these activities and to bring the perpetrators to justice.

The things that criminals do to hide their ill-gotten gains include holding large cash sums and buying expensive cars, art, jewellery and expensive clothes in order to live a lifestyle that they have not earned through legal means, as the noble Lord, Lord Dear, said. An estimated $1.6 trillion is laundered throughout the world, and the National Crime Agency estimates that many billions of pounds of that money is laundered into or through the United Kingdom as a result of international corruption. Those are staggering figures, and they illustrate why action is needed.

The noble and learned Lord, Lord Brown of Eaton-under-Heywood, made an important point about the disparity between these criminal gains and the amounts recovered from those criminals, as did a number of other noble Lords during today’s debate. Action must be taken to make the UK the most hostile place in the world for those seeking to move, hide or use the proceeds of crime, and the criminals must get that message loud and clear.

I agree with what the noble Lord, Lord Flight, said about the importance of the various agencies, both public and private, working more closely together and sharing information, and the provisions there are very welcome.

That must also be the case for all the Crown dependencies, and this is one area where I think the Bill is deficient and improvements need to be made. My noble friend Lord Watson was right when he highlighted that the Government’s position on our overseas territories is weak: they have to do better than they are doing at present.

Transparency is one of the most effective ways of dealing with this type of corruption. The right reverend Prelate the Bishop of Oxford spoke about the scandal of the illicit flows of funds from the developing world and the need for firm action to be taken to deal with the issue of tax havens in British Crown dependencies and overseas territories. The lack of transparency is a real problem and prevents individuals from seeing who owns what. It enables criminals to hide behind a cloak of secrecy.

I agree with the noble Lord, Lord Hodgson of Astley Abbotts, that we have to get the issues right in respect of overseas territories. It would be appreciated if the Minister could explain to the House why the Government have not sought to introduce requirements to ensure that overseas territories and Crown dependencies which come under the jurisdiction of the United Kingdom publish publicly available registers of beneficial ownership. It is a requirement here in the UK, allowing us to see who owns which company, so why not in overseas territories and Crown dependencies?

The United Nations Conference on Trade and Development recently estimated that tax havens, including those in the United Kingdom’s overseas territories, are costing developing countries at least $100 billion per year. The noble Lord, Lord Thomas, referred to this. The Minister must be aware that the British Virgin Islands was by far the most widely used tax haven in the Panama papers, as referred to by my noble friend Lord Rosser. We have the ability to change that, and we should take the opportunity that the Bill provides to do so.

With the additional challenge of Brexit, it is important that we create an economy, a business centre, that is the best in the world in which to do business legally and is attractive to inward investment but protected from the risks of criminality. I do not agree with the noble Lord, Lord Hodgson of Astley Abbotts, if he is against proper regulation. It is not about box-ticking but about preventing criminality in a proportionate manner.

I have been reading Faulty Towers, a report from Transparency International UK which looks at the impact of overseas corruption on the London property market. It makes staggering reading. £4.2 billion of property has been bought in London with suspicious wealth, as the noble Baroness, Lady Kramer, referred to. In 14 landmark developments, almost 40% of future homes were bought by those from high-corruption jurisdictions. Again, I agree with the noble Lord, Lord Faulks, in this respect.

My noble friend Lord Rooker made important points about who owned what property in some of the most expensive parts of London. The shining of sunlight on bankers, estate agents and other middlemen must happen urgently. This situation leads to, among things, a distortion of housing supply, with ordinary law-abiding citizens unable to afford a home in the capital. The noble Lord, Lord Patten, speaking about the effects of criminal activity on the purchase of property in London, made similar points.

My noble friend Lord Anderson of Swansea made important points about properties bought in London with suspicious funds and asked who should ring the alarm bells—should it be the estate agents, lawyers, accountants and the bankers? I bought the home I live in 13 years ago. My wife and I could not afford to buy it at today’s prices, and we live in a very ordinary terraced house in Lewisham. That is a problem all over London, with people who work hard, pay their taxes and play by the rules unable to afford a home in the capital.

I agree with the noble Baroness, Lady Kramer, on the need for further protection for whistleblowers. I hope that the Minister will comment on that in her response.

There are many welcome measures in the Bill. Part 1 includes a number of measures, including the creation of unexplained wealth orders, which seek to tackle criminals who claim that they have no assets and are penniless but at the same time appear to control considerable funds. This measure will require an individual or organisation to explain the origin of assets that appear to be disproportionate to their known income. It is a welcome move, as is the extension of disclosure orders to money laundering, which will require someone who has relevant information to answer questions put to them as part of an investigation.

Chapter 2 of the Bill seeks to improve the procedures around money laundering and suspicious activity reports. Allowing the National Crime Agency further time to consider such reports, along with the power to request further information, is again a welcome move. The sharing of information to identify illegal activity is vital, and ensuring that companies can share information for the purposes of preventing and detecting serious crime, with clear legal certainty, will be another important tool in the box. The noble Lord, Lord James of Blackheath, gave a number of examples of shocking practices that have taken place in the past. Such behaviour has to be condemned and stamped out, with, where necessary, people brought to justice for behaving so irresponsibly, aiding criminality and putting lives at risk.

Tax evasion is a crime. I welcome provisions in the Bill that seek to disrupt this activity and in particular to deal with the issue of a company operating a business in the UK being able to escape criminal liability because a tax loss is suffered in another country rather than the UK. This will be of particular benefit to developing countries, which are at great risk of such activity.

Additionally, I welcome the introduction of new powers in respect of forfeiture and seizure of assets. I will want to probe in Committee whether we have got the list right and whether the process to amend it by the affirmative procedure is the correct way to proceed.

The Bill also seeks to extend the powers of various officials and agencies. We will again probe in Committee whether the new measures are both proportionate and fit for purpose.

The second part of the Bill extends powers provided for in Part 1 so that they can apply to investigations in relation to terrorist assets and terrorist financing. These measures are welcome. We must always be vigilant and ensure that we have in place measures to assist the appropriate authorities in carrying out investigations into terrorist offences. I am sure that the Minister will acknowledge the sometimes grey area between money laundering offences, criminality and terrorism offences, so having powers that work across the piece is important for those engaged in the work to keep us safe.

Part 3 introduces a welcome new corporate offence of failure to prevent tax evasion, but we will want to explore in Committee what further can be done. The noble Baroness, Lady Bowles of Berkhamsted, is right that people have the right to know who owns which companies and to be clear about the chain of responsibility. Economic crime must be policed with vigour. Good companies will have proper procedures in place and those that do not will be forced to take action. The Prime Minister has committed to getting tough on irresponsible behaviour in big businesses, and that is an aim I welcome very much.

Cracking down on corporate economic crime has the potential to deliver significant savings to taxpayers and ensures that the vast majority of businesses that act responsibly and play by the rules are not put at a competitive disadvantage. It would be useful if the Minister could comment on how she sees the present balance of the corporate liability regime and whether there is not a case for reform to make it easier to prosecute those companies that commit offences.

I again confirm that I welcome the Bill. We will seek constructively to probe and challenge the measures contained in it so that we send back to the other place an even better Bill that can tackle effectively and proportionately all the issues that Members around the House want dealt with, with people protected and kept safe, which is the first duty of government.

14:17

[Baroness Williams of Trafford]

My Lords, I thank all noble Lords who have taken part in this Second Reading. We have had a very constructive debate and consensus across the piece that there should be general support for the Bill. Clearly, we will take a few things further in Committee—I think I know what they are.

The noble Baroness, Lady Stern, said that I must be very happy to be introducing a Bill such as this. Yes, I am. It will further enhance our ability to bring to book those who seek to engage in corruption and tax evasion and benefit from all those other proceeds of crime.

I will turn first to the Crown dependencies and overseas territories, because it is what most noble Lords have mentioned today. The Government agree about the importance of combating grand corruption. International corruption threatens the progress of many developing nations, and this country must do everything in its power to leverage our international status, and that of our financial sector, to combat it.

There is clearly still much to do, but the Crown dependencies and overseas territories with a financial centre have made significant progress on the commitments that they made in the run-up to the London anti-corruption summit last year. That summit positioned the UK as a global leader in the fight against corruption, and the Government have not changed their position. As the noble Lord, Lord Rosser, and many other noble Lords pointed out, the UK has created its own public register. We are leading the way, and we hope that others will follow. Progress is being made, and I encourage noble Lords to recognise the considerable amount of work that is going on in this area. I take this opportunity to thank my noble friends Lord Flight and Lord Faulks for outlining the progress that is going on in the Crown dependencies as we speak.

The noble Lord, Lord Rosser, asked whether we can legislate for the overseas territories and Crown dependencies. We have the power to legislate for the overseas territories and Crown dependencies, but we do so almost always with consent. Where we do not, it is on moral and human rights issues, such as homosexuality and the death penalty. However, just because we can legislate for them does not mean that we should do so when we are working with them to implement existing agreements on a consensual basis. This has already delivered significant achievements, and it is right that we continue with this approach.

Obviously, our long-term ambition remains that publicly accessible registers of beneficial ownership will become the global standard. Should this happen, we would expect all jurisdictions to meet this standard, including the overseas territories and the Crown dependencies.

[Lord Watson of Invergowrie]

I welcome the fact that discussions are continuing with the overseas territories, but they seem to be left entirely open-ended. In my contribution, I asked for a deadline. I do not believe that the Minister will give me one now, but there has to be some point beyond which we say to the overseas territories, “We’ve tried discussing this with you, we’ve tried to carry you with us, but if you’re not coming, then we have to take positive action”.

[Baroness Williams of Trafford]

I hope I can be helpful to the noble Lord. Progress is being made, but at a point at which progress is not made, we may have to take a different view. As we see it now, the overseas territories have come an awfully long way from where they were even this time last year. My noble friends have given the House an update on how much progress the Crown dependencies are making. The point is that there is progress. Were progress not to be there, I might have given a different response to the noble Lord. I hope he is satisfied thus far with what I am saying.

[Lord Anderson of Swansea]

Is there not the danger in the argument of a level playing field of a comprehensive public register across the board that that will never be achieved, because there will always be some countries which would hold out against it? All one can reasonably hope for is the greatest measure of agreement.

[Baroness Williams of Trafford]

The noble Lord is absolutely right that we will never get a global homogenous position with every country being equally compliant. We are aiming for those territories and Crown dependencies to work towards the standard to which we aspire. That is where we are at this point. I hope both noble Lords are satisfied with that.

I trust that this House, like the Commons, will recognise the constitutional settlement that we have with these territories and agree that we should look to work consensually with them rather than enforcing legislation.

The noble Lord, Lord Rosser, and my noble friend Lord Faulks made the point that there is no point in legislating if law enforcement agencies do not have the resources to deliver. I understand the concerns raised regarding law enforcement and the resources available fully to implement these new powers. I am pleased to say that £764 million has been invested in law enforcement agencies since 2006 and that more than £257 million has been invested over the past three years under the asset recovery incentivisation scheme—otherwise known as ARIS—which returns recovered assets back to the front line. These moneys are used by law enforcement for reinvestment in law enforcement capabilities or in community crime prevention schemes.

In addition, the Home Office share of ARIS is invested in front-line capabilities, including the regional organised crime units, ROCUs, which have received more than £100 million in direct funding from the Home Office since 2013-14. We reformed ARIS to boost the resources available to tackle serious and organised crime. A top slice of £5 million has been set aside every year until the end of this Parliament to fund key national asset recovery capabilities.

The noble Lord, Lord Rosser, also asked which agencies can use the powers in the Bill. The powers in the Bill can be used by a variety of law enforcement agencies, not just the NCA. The police, the Serious Fraud Office, HMRC, the Crown Prosecution Service and immigration officers will be able to use the new powers in the Bill to investigate money laundering and seize criminal assets.

My noble friend Lord Faulks asked about the effect of partial compliance with a UWO. If there is compliance or purported compliance, the rebuttable presumption that the property is recoverable does not arise. However, law enforcement has valuable information and can pursue an investigation, if relevant. If the purported compliance is false or misleading, it will be an offence.

My noble friend also asked why so few UWOs are predicted—20 per year—and why the amount expected to be recovered as a result of UWOs is so small. A number of other noble Lords alluded to this. I reassure noble Lords that the figure given in the impact assessment is a conservative estimate based on the views of operational practitioners. It is not a definitive indication of how often this power will be used. The Government are keen that these powers are used in as broad a range of cases as possible, and we are already actively engaging with law enforcement and prosecutors to encourage the use of all the new powers being introduced by the Bill. Ultimately, it will be for the enforcement authorities, which are operationally independent, to decide when and how often to use these new powers. We will carefully monitor and review the use of UWOs once they are introduced. This will inform future changes that may be needed to ensure that they are being used to their maximum effect.

My noble friend also asked what we have learned from the use of UWOs in Australia. As part of the work developing our draft legislation, we have noted with interest the experience of other jurisdictions which have existing provisions for UWOs, Australia being one of them.

The noble Lord, Lord Rosser, and other noble Lords spoke about corporate failure to prevent other economic crime and asked why the Government have not created a corporate liability offence in respect of failure to prevent economic crime. The damage caused by economic crime perpetrated on behalf of, or in the name of, companies to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business is a very serious matter. However, the Government believe that it would be wrong to rush into legislation in this area and that there is a need to establish whether changes to the law are justified.

On corporate criminal liability for economic crime, the Government launched a public call for evidence on 13 January—which I think one noble Lord alluded to—which is open until 24 March. This is part of a potentially two-part consultation process. It has requested and will examine evidence for and against the case for reform and seeks views on a number of possible options, such as the Bribery Act failure to prevent model. Should the response the Ministry of Justice receives justify changes to the law, a consultation on a firm proposal would follow. We are therefore not in a position to comment on the timetable for reform, should that be the way forward.

The noble Lord, Lord Rosser, made a point about SARs reform, which was mentioned during the consultation on the Bill but is distinctly lacking in the Bill. He asked whether SARs will be prioritised as major and trivial. Reform of the SARs regime is a crucial part of the Government’s Action Plan for Anti-money Laundering and Counter-terrorist Finance. We have established a programme to reform the SARs regime, working collaboratively with partners in line with commitments published in that plan. The Government are seeking improvements in the short, medium and long term, and the legislative elements in the Bill are only one element of the wider reform that is required. During the review of the SARs regime that the Home Office ran in 2015, a number of regulated-sector companies suggested that suspicious activity reports should be prioritised. We will consider this as part of the SARs reform programme.

The noble Lord, Lord Rosser, suggested that the anti-money laundering regime is confused and ineffective and asked what HMG are doing to reform the 27 supervisory bodies. The Government consulted on reforms to the anti-money laundering supervisory regime in the autumn and have considered the responses. The Treasury intends to publish the outcome of that review in the coming weeks in order to ensure the most effective possible supervision of the regulated sector.

The noble Baroness, Lady Kramer, talked about whistleblower protection.

[Lord Hodgson of Astley Abbotts]

My Lords, does that mean that the results of the consultation will be available in time for Committee? What was discovered as a result of that consultation will inform our debate on money laundering in a very important way.

[Baroness Williams of Trafford]

I can find out and let my noble friend know. I did say a matter of weeks, so we may be in luck.

Protection for whistleblowers under the Employment Rights Act 1996 means that dismissal for whistleblowing is automatically unfair. BEIS is reviewing legislative provisions around protecting whistleblowers in the workplace and will make recommendations on how we might strengthen them.

My noble friend Lord Faulks and another noble Lord referred to the Observer article about individuals using the tax on enveloped properties and asked what was to become of that. We are providing new investigate powers, including UWOs, which will make it easier for our law enforcement agencies to investigate money laundering in the London property market and recover the proceeds of crime. However, the issue will not be solved by law enforcement action alone. We need to ensure that lawyers, estate agents and other professions, as many noble Lords have mentioned, are complying with their obligations under the Money Laundering Regulations. To that end, the Treasury has launched a review of the anti-money laundering supervisory regime and will publish the findings imminently.

In addition, the Government intend to publish a call for evidence, seeking views on a new register of overseas companies that own property in the UK. We hope to do so shortly and will then introduce the relevant legislation when parliamentary time allows.

Lord Rookie—sorry, I mean the noble Lord, Lord Rooker; I do not know why I called him “rookie”—talked about the Government ensuring that the Magnitsky power will be used. The expansion of the civil recovery regime is a significant step and adds to the suite of powers available to UK law enforcement agencies, including the NCA, to combat money laundering and other serious crime. Ultimately, it will be a matter for the agencies to decide which powers are justified on a case-by-case basis, but the use of this power will be subject to the relevant safeguards in Part 5 of POCA. In particular, law enforcement agencies will need to be satisfied and have the evidence required to satisfy a court on the balance of probabilities that property in the UK is the proceeds of gross human rights abuses or violations overseas.

The noble Lord, Lord Rooker, talked about fines on banks in the UK. He raised the issue of banks in the UK not being penalised for laundering funds from overseas. I have a huge list of fines, which I will not read out today, because it would take up valuable time in responding to the noble Lord’s point, but I will send it to him and other noble Lords and place a copy in the Library.

My noble friend Lord Faulks asked about deferred prosecution agreements in the Bribery Act, and I thank him for his words on DPAs. I agree that they are a very useful tool that encourages companies to engage with law enforcement and self-report wrongdoing. It is used effectively for bribery overseas, for example, in the case of Rolls-Royce, and it will be useful in bringing new offences under Part 3.

The noble Lord, Lord Flight, asked what the Home Office is doing to improve asset recovery and said that not enough is being recovered. More assets have been recovered under this Government than ever before. In 2015-16, we recovered more than £255 million-worth of criminal assets using the POCA powers. We have delivered our 2015 manifesto commitment to return a greater share of recovered assets to the police. When performance exceeds the baseline set in 2015-16, additional receipts will be invested in the regional asset recovery teams, which I think is the right way. The 50% share of recovered moneys that are already invested, including in local police forces, will be unaffected.

The right reverend Prelate the Bishop of Oxford talked about the large proportion of African wealth invested in tax havens. The UK is working precisely on that to bring corrupt leaders to justice and recover the assets that they have stolen, quite often from their own people, as the right reverend Prelate said.

In 2014-15, DfID’s gross losses to fraud and corruption were approximately £2.3 million, recoveries were £1.5 million and the net loss was therefore £750,000, which is a recovery rate of 67%.

The noble Lord, Lord Rooker, asked about procurement, particularly in the public sector. HMG are acutely aware of the risks that central and local government face, and that is why procurement is one of the priorities in the forthcoming anti-corruption strategy. He and other noble Lords have praised my right honourable friend in the other place, Sir Eric Pickles, and I join them in that praise.

The noble Lord, Lord Flight, and other noble Lords made a point about domestic PEPs. According to the Financial Action Task Force and EU law, politically exposed persons must be subject to some sort of enhanced due diligence in recognition of their influence, their authority and their prominence in public life. Our view is that banks should take a proportionate and sensible approach to know-your-customer measures for Members of Parliament, Peers and other UK PEPs. I fully accept, because I have heard various anecdotal evidence, that perhaps this is not being consistently applied across the piece.

I hope noble Lords will indulge me for one more minute, because I have quite a few things to get through. The noble Baroness, Lady Whitaker, asked when UWOs will take effect and when the code of practice will be available. At the earliest opportunity is the answer to that.

The noble Baroness, Lady Bowles, made a very good point about company director disqualification. Where a director is convicted, they can be disqualified as part of their sentence. Where a company is convicted of a Part 3 offence and the director is not party to that, fairness requires a separate hearing of application to disqualify. Where a director of a corporation is implicated in wrongdoing, they can be subject to prosecution. If their actions amount to criminality or facilitating tax evasion where their actions fall short of being criminal, investigators can already investigate whether they are fit and proper to continue to hold the position of a company director and report their findings to the Secretary of State.

I realise that I am well over my time and will have to write to noble Lords, as I still have a wad of answers here. I finish by again thanking noble Lords for what has been a very enjoyable debate.

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