Economic Crime (Transparency and Enforcement) Bill

2nd reading
Wednesday 9th March 2022 Lords Chamber

Second Reading

18:17

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, in light of Russia’s invasion of Ukraine, it is vital that we take new action to crack down on Russian dirty money and corrupt elites in the UK. The measures in the Bill—passed with cross-party support in the other place—will enable us to better identify, investigate and sanction the illicit wealth of those who wish to abuse our open economy. While we are rightly focused on taking action against Putin’s regime, these measures will strengthen our framework for tackling economic crime for the long term.

I have been heartened by the previous offers from those across all parties, including on the Opposition Front Benches, to support and co-operate with the Government on emergency legislation and to offer practical support to ensure that the Economic Crime (Transparency and Enforcement) Bill is implemented. I very much hope that we can continue to work in this spirit.

The Bill comprises some emergency measures, developed in light of Putin’s outrageous actions in recent weeks, and other measures that have been planned for quite some time. The first is a new register of overseas entities, which will require overseas companies owning or buying property in the UK to give information about their true owners to Companies House. This will provide more information to help law enforcement identify those using UK property as a money laundering vehicle.

Secondly, there will be reforms to unexplained wealth orders, which are a key tool for the investigation of suspicious assets. Through this Bill, we will improve their effectiveness and make sure that they can be applied to complex ownership structures.

Thirdly, we will streamline the sanctions Act to enable even swifter sanctioning of oligarchs and businesses associated with the Russian Government. The Bill also includes amendments to financial sanctions legislation, including strengthening the Treasury’s power to impose monetary penalties on those who violate our financial sanctions laws.

These are the actions that we can take most swiftly but they are not the sum total of our ambition. We will introduce a second economic crime Bill with further measures as early as we can in the next Session. This will include major reform of Companies House, reforms to prevent the abuse of limited partnerships, new powers to make it easier to seize crypto assets from criminals and measures to provide businesses with more confidence to share information on suspected money laundering. This second Bill will be a substantial piece of legislation. I know that some of the measures it contains have long been called for. I can assure the House that drafting is under way and we will bring it forward as soon as we are able.

I will now provide more detail on the measures in today’s Bill. The Bill will create a register of overseas entities which will require anonymous foreign owners of UK property to reveal their real identity, ensuring that they can no longer hide behind secretive chains of shell companies. We know that corrupt wealth is stored in property in this country, and this new register will help us to find it. Too often, investigators at the National Crime Agency and other bodies reach a dead end when they find that a property of interest to them has its title registered in the name of a foreign company. It can be very difficult to obtain adequate information about that company, depending on where it is registered.

This new register would apply essentially the same beneficial ownership requirements to these companies as already apply to domestic companies registered at Companies House. An overseas entity that owns or wishes to own land in the UK will be required to take steps to identify its beneficial owner or owners and register them with Companies House. They will be required to verify that information and evidence that verification, and they will be required to update information annually. The provisions will apply retrospectively as far as Land Registry data allows: 1999 in England and Wales, and 2014 in Scotland. Should a foreign company not comply with these new obligations or submit false filings, its managing officers can face criminal or civil penalties. In many cases, these officers may be overseas and beyond the reach of UK law enforcement. That is why the key sanction will be the loss of rights to sell or lease the property until the register is populated with verified information.

I emphasise to the House that this is an information measure—an additional tool for law enforcement to use to inform investigations, including the case for making an unexplained wealth order. It is not a necessary underpinning of the actions we are taking right now to sanction allies of Putin. Rather, it will help to clean up our property market over the long term. However, I am mindful that many in your Lordships’ House will want to see it implemented as swiftly as possible, and I can assure the House that work to deliver the register will begin as soon as the Bill receives Royal Assent. A transition period will be in place as an essential protection for the many legitimate businesses and individuals who are likely to be holding property through overseas entities. Noble Lords will know that the Government have already amended the Bill in the other place to reduce this period to six months. We have committed to looking at how any entity in scope of the register selling its property before the register is operational should not be able to evade that scrutiny.

I turn now to the reforms to remove barriers to the use of unexplained wealth orders. These changes will increase the time available to law enforcement to carry out investigations, allowing them to be more comprehensive. We will also reform cost rules so that agencies will not be required to pay respondents’ costs unless they act dishonestly, unreasonably or improperly. This will remove a key barrier that discourages the use of UWOs and will increase and reinforce operational confidence in their use.

With this legislation, unexplained wealth orders will become more effective against those who hold property in the UK through trusts and other complex ownership structures. By targeting those who manage the properties on behalf of the beneficiaries, law enforcement will be able to obtain information that may be obscured by the beneficiaries. Individuals will not be able to hide behind shell companies and foundations any more.

I turn now to the amendments introduced to the Bill in the other place by which we propose to revise the sanctions Act. They will allow us to sanction oligarchs and businesses associated with the Russian Government even more swiftly, in concert with our allies. The new measures will ensure that we have the power to use urgent designation procedures to temporarily mirror the listings that have already been adopted by our allies. The United States, Canada, Australia and the EU are listed in the Bill, and others may be added by regulation.

We will remove the statutory test of appropriateness for making designations, thus simplifying the process. Ministers will still need to be satisfied that there are reasonable grounds to suspect that the person to be designated is “an involved person”, usually on the basis that have been involved in a specified activity. In the context of Russia, the activities specified in regulations include destabilising Ukraine, undermining or threatening its territorial integrity and supporting the Government of Russia. This is the right test to focus on in sanctioning an individual, without unnecessary statutory hurdles.

The Bill will remove some of the constraints on designations by description so that the Government can designate groups of individuals more quickly—for example, members of defined political bodies such as the Russian Federation Council. The Bill will also remove burdensome requirements to formally review each and every sanction every three years, freeing up vital resource to focus on developing new designations. However, designated persons will continue to have the opportunity to ask for their designation to be reviewed through an administrative review, and for the outcome of that review to be considered by the courts. Ministers will continue to be under a duty to revoke a designation where the relevant tests are no longer met in respect of it. The Bill will streamline reporting requirements while ensuring that Parliament can continue, rightly, to hold Ministers to account.

We are seeking to protect the public purse by permitting the payment of damages in connection with designations only in the case of bad faith. The Bill also provides a power to impose a cap on damages applying to any proceedings issued after 4 March, when the amendments were originally tabled in the other place. This will limit the ability of deep-pocketed oligarchs to claim massive payouts from sanctions challenges.

The Bill will also enhance the enforcement of financial sanctions. It will make it easier for the Treasury to impose significant monetary penalties, to name publicly those who have breached financial sanctions and to expand information-sharing powers.

We are collaborating with the devolved Administrations on this Bill. Provisions in it relating to the register of overseas entities and unexplained wealth orders engage devolved powers in both Scotland and Northern Ireland. We will continue to work with them on implementation and I am confident that we can rely on their continued support, for which I am very grateful.

The Government have consulted on the measures in the Bill. The register of overseas entities was the subject of extensive consultation and pre-legislative scrutiny. The Government accepted and acted on most of the Joint Committee’s recommendations. We have designed the reforms of unexplained wealth orders in close consultation with law enforcement agencies and representatives from the accountancy, financial and legal sectors. The Treasury will engage with industry on updating the guidance for financial sanctions before this reform takes effect. I can therefore assure the House that the Government are not acting rashly, and I urge it to support the Bill.

The Bill will ensure that our economy becomes more transparent and stronger at the same time. It will give our enforcement agencies the powers they need to effectively tackle dirty money. The House will be in no doubt, and will have noted, that the other place overwhelmingly supported the Bill when it was considered there on Monday. The Government worked with the Opposition there to strengthen and accelerate the package, and there was a clear and strong desire across party lines to present a united front by passing the legislation as swiftly as possible. I urge noble Lords to take a similar approach in this House. With that, I beg to move.

18:30

[Baroness Chapman of Darlington (Lab)]

My Lords, we warmly welcome the arrival of the Bill and we are pleased that the Government have promised to introduce a further economic crime Bill in the next Session. In warmly welcoming the Bill, I would just like to make some points to noble Lords. This is significant progress compared with the position outlined by the noble Lord, Lord Agnew of Oulton, in January, when it appeared that the Government did not want to treat this as a priority issue. But now Putin has left them with no choice. Until now, I am afraid there has been a persistent and troubling lack of political will to act on these issues from the Government. It has taken war to bring about this change of position, and the Government should have acted sooner.

This is welcome, but we do not kid ourselves. The Bill does not resolve all our issues, but it is a stopgap and we will support it. It is the first instalment and we await the detail in part two. I welcome the noble Baroness’s assurances in her speech that part two will be extensive and we look forward to it. The Bill introduces a register of overseas entities, revisions to the function of unexplained wealth orders and changes to the Government’s sanctions regime.

There has long been a case for a new register such as the register of overseas entities. We have been promised it time and again, as far back as the Anti-Corruption Summit of 2016. But the Government have always failed to produce the goods when pushed to do so, and this we regret. We have had multiple consultation exercises on this issue, yet it has taken until now for the Government to move. We have known about weaknesses in the UK’s anti-money laundering regime for some time, with the Financial Action Task Force noting in 2018 that there was a need for substantial increase in resources devoted to financial intelligence as well as a series of other, fundamental reforms.

The truth is that for too long the Government have turned a blind eye to illicit funds being funnelled through the British economy—up to £100 billion per year according to the NCA. There is, as we know, no silver bullet to fight against economic crime. This new register is a much-needed tool, but it will not work unless we get the next Bill right, including by addressing the long-running concerns about the resourcing and powers of key investigatory and enforcement bodies.

Turning to unexplained wealth orders, this tool has not been as effective as hoped so far, so we welcome the various moves to strengthen the unenforced wealth order regime. It is vital that these orders are used. It is important that we understand why so few of those orders have been implemented so far—only 15 orders and four cases. This cannot be explained away entirely by the risk of legal costs. The capacity of the NCA, SFO, FCA, HMRC and CPS to handle these orders also needs to be considered. The Government’s new Clause 31, requiring the Secretary of State to publish annual reports into the use of unexplained wealth orders, is definitely a positive step and we welcome it.

The Bill amends the Sanctions and Anti-Money Laundering Act 2018. The Government are making it easier to replicate the EU’s decisions in this and we welcome the collaborative working in this area with our international partners. This is a demonstration of strength and we back it. The campaign for an effective sanctions regime, though, began following the death of Sergei Magnitsky in 2009. The measures we are finally seeing now are welcome, but we do ask ourselves whether we will not be looking back and wondering whether we would be in a stronger position today had we acted sooner.

If we are to isolate Putin and his network of oligarchs and kleptocrats, the Government need to use these new powers immediately, bringing both pace and breadth to their response to events in Ukraine. While the Bill is not solely about Russia’s illegal and immoral invasion of Ukraine, it is regrettable that recent events have had to unfold before the Government have been prepared to bring these measures forward. Nevertheless, we will show solidarity with Ukraine by assisting the Government in the swift passage of this legislation. It is a common-sense approach to beginning to crack down on the shocking level of economic crime that has taken root in this country.

The Opposition have worked constructively with the Government since they announced the Bill and I am grateful to Ministers in the other place for adopting several of our key asks, including a reduced grace period for registering beneficial ownership and much harsher fines for those who break the rules. There remains, though, more to do. The grace period may have fallen from 18 months to six, but we on these Benches think it is still too long. Properties will be sold and other assets disposed of in far less time, severely undermining the effectiveness of the new register.

As drafted, the Bill does not yet do enough to crack down on the so-called enablers of money laundering and other forms of economic crime. They are arguably as guilty as those who seek to bring illicit funds to our shores in the first place. We know that Ministers are looking to bring forward amendments in a number of areas; we hope they will respond to concerns voiced by noble Lords in this debate today. Can the Government also offer us assurances that the follow-on Bill will be subject to normal processes, allowing both Houses to study and debate all the relevant measures in detail? I hope your Lordships will pass the Bill without undue delay but, in doing so, can we commit this evening to finally tackling the shameful spectacle of illicit money being laundered through our country?

18:37

[Baroness Kramer (LD)]

My Lords, every day’s delay in bringing in these measures costs Ukrainian lives, so these Benches join in wishing to pass the Bill urgently. We have, however, been calling for the key property ownership elements in the Bill for years, and we wish we had had them at a time when we could have gone through it carefully, clause by clause, and amended their various flaws.

I am delighted that the Minister has given us an assurance that she will bring the sequel to the Bill promptly. We will be watching for that. It must, as she said, deal with Companies House, limited partnerships and cryptocurrencies, which I am glad she mentioned. I take note that Russia, on the day of the invasion of Ukraine, moved to control key crypto exchanges, and I say to the Government that it may be necessary to move on that issue ahead of part two, because it is an obvious escape hatch that Russia is taking full advantage of. We also hope that in part two the Minister will address two other areas: trusts, which appear not to be fully covered by Schedules 2 and 3, and freeports, with their secrecy privileges. There will be a great deal to do in part two.

As for this Bill, let me start with provisions that deal with the public register of the beneficial ownership of property in the UK. Why have those with property interests purchased with dirty money and hidden by shell companies been given a six-month transition period, during which implementation is suspended? I accept that this is less of an escape hatch than the original 18-month transition period in the first version of the Bill, but it still gives any oligarch plenty of time and scope to alter their arrangements, including by liquidating and moving assets out of the United Kingdom into a safe haven. I understand that the office of the registrar needs to be staffed, resourced and trained, but that should be done urgently and, if necessary, the registrar should be loaned staff to bring its capacity up as quickly as possible.

Surely, penalties for breaching the rules should be retro-effective. It is a technique used by HMRC, particularly against small taxpayers under the loan charge, and it seems ideal to be adapted to this particular set of circumstances. Perhaps the Minister could also tell us whether there are existing powers that could be sharpened to cover the transition period.

Why does the Bill give the Secretary of State sweeping powers to exempt anyone from the register in the interests of the economic well-being of the United Kingdom? That is an incredibly broad criterion, but particularly inappropriate in this country, where allies of Putin are utterly enmeshed as major players in our economy, from media to sport to manufacturing. I am sure that no Minister would dream of making an exemption now, during the Russian invasion of Ukraine, but the clause is a message—and not a subtle one—that, once the crisis fades, anyone with a significant investment in the UK economy, regardless of the source of their money, can expect the privilege of an exemption.

Again and again in this House, your Lordships have warned that the Bill must deal with the network of enablers: the legal firms, the accountants, the developers, the banks—in effect, those who have opened the gate to dirty money and used all their skills to keep it open. I said a few days ago that this would be painful. Enablers include many respected names with very close ties to the political establishment; but why does the Bill not crack down on them and why is there no failure-to-prevent clause included in the Bill, or some equivalent kind of action? It is absolutely vital.

I will say only one thing about unexplained wealth orders. I do not wish to belittle them but, given the extraordinarily high income that oligarchs and kleptocrats enjoy from their many business interests, how useful are these orders and these clauses in our current emergency? Do they really have very much practical relevance? I am not opposed to them, but let us not put undue weight on them.

I welcome the strengthening of sanctions, but I say to the Government that, whenever anything is done in hot haste—and it has to be done that way on this occasion; I fully accept that—it is very sensible later to do a review and work out whether what was needed was done, whether there was any overreach and whether the measures were entirely appropriate. I hope we will hear that from the Government.

Lastly, enforcement absolutely matters. How confident are the Government that the Crown dependencies and overseas territories have adequate sanctions and controls and enforcement capacity? For us, what is the Government’s resourcing plan? The registrar’s office, which will have to verify all this hoarded information, will face a mountain of data and process. When will it be staffed? At the last asking, the National Crime Agency, on which we heavily depend for enforcement, had only 118 staff to investigate all financial crime, despite its complexity and the powerful lawyers and accountants used by the other side. How many additional staff, rather than transferred staff, will there be in the new kleptocrat cell and when will it be up and running, effective and fit for purpose?

If ever there was a time when we needed whistleblowers—and fast—it is now. They are not even mentioned in the Bill. The United States recently passed the Kleptocracy Asset Recovery Rewards Act, with cross-border and extraterritorial jurisdiction. Are we seriously telling whistleblowers, “Go to the Americans—we can’t be bothered”? Or will the Government commit to tackling this omission, hopefully in this part of the Bill, but, if not, absolutely, definitely in Part 2?

18:44

[Lord Vaux of Harrowden (CB)]

My Lords, I remind the House of my interest as a chartered accountant—which I hesitate to do after the last speech, I have to say. Like most noble Lords, I welcome this Bill, although I greatly regret the Government having to introduce these measures in such circumstances and in such a rush. We have tolerated for far too long the UK—and London in particular—becoming a haven for the ill-gotten gains of criminals. Of course, we need to get this Bill onto the statute book quickly, so that we can effectively sanction those responsible for the atrocities taking place in Ukraine.

Economic crime, however, is a much wider subject than Russia, and we have a lot of work to do to remedy the laissez-faire attitude to economic crime that has pervaded government policy—or, perhaps, lack of policy—in the last decade. The resignation speech of the noble Lord, Lord Agnew, said it better than I ever could. There is much more to do than is covered in this Bill, and I was pleased to hear the reassurances about the follow-up Bill.

In my comments, I will concentrate on the overseas entity register, but I have one observation on the unexplained wealth order clauses. The Government have blamed the aggressive use of legal action by oligarchs as the major reason why UWOs have not been successful so far. I am sure that there is some truth in that, but I am unconvinced that it is the main issue. More likely, the major problem is the lack of a properly resourced enforcement agency—something we also see in the wider issue of fraud more generally. I understand the reason for introducing legal costs clauses, but I do feel uncomfortable that someone who is entirely innocent will not be able to recover the potentially huge legal costs to defend themselves.

The overseas entity register is a good start, but I am afraid I do not expect it to make much practical difference. Innocent people will provide the required information—which is useful in itself—but those who are using offshore structures dishonestly to hide their identity will still be able to do so. There are many other ways of hiding ownership, including discretionary trusts, undisclosed nominees, complex corporate structures and so on. The current alleged situation of Graham Bonham-Carter and Oleg Deripaska is a good example of how this can happen.

So, in the spirit of being helpful, how might we improve this? First, while the reduction from 18 months is welcome, the time period of six months is still too long. In fact, the period is more than six months, because these clauses do not commence until such date as the Secretary of State decides. Can the Minister say when that will be? Six months still gives a lot of time for people to rearrange their affairs to avoid the rules. I would have favoured 28 days, but perhaps the three months that the Institute of Chartered Accountants has suggested might be a good compromise.

Secondly, while the new rules will prevent a property being sold once the rules are in force until the entity is registered, this does not stop the sale of the company, or, indeed, of a company further up the chain. The Bill will therefore not prevent a criminal realising the value of the property. Frankly, there is probably not a lot we can do about that, but I note that the register will only have to be updated annually, so it may be a very long time before we discover the change. It would be better if the changes to the beneficial ownership had to be updated on the register immediately after the transaction takes place. The Companies Act 2006 requires the persons of significant control register to be updated within 14 days. Perhaps the Minister could explain why the overseas entities register is different from that?

Thirdly, the register will be pointless if there is no real verification of it. One way to improve that would be to leverage the due diligence that should already be happening under anti-money laundering legislation, although clearly this does not always happen as well as it should do. At the moment, we rely on the passive, risk-based requirement to report suspicious activity. It would seriously concentrate the minds of lawyers and accountants who advise those using offshore entities if there was an active requirement for them to place a statement on the register that they have carried out their due diligence and are satisfied that the beneficial ownership is correctly stated, and if we also made sure they were liable for that statement under Clause 15. As well as improving the integrity of the register, this would have the additional impact of making those who are enabling the hiding of assets to think very seriously about it. The requirement for such a statement could easily be included in the regulations to be made under Clause 16. Is that something the Minister would consider?

This Bill is a start, but it is a rushed Bill, issued to deal with an emergency situation, and scrutiny is being substantially curtailed. It is not without flaws. As I said, the subject of economic crime is much wider, and deserves much greater work and consideration. I was pleased to hear the details of the follow-up Bill, which needs to be comprehensive. Can the Minister please make a clear statement that the follow-up Bill—given the curtailed nature of the scrutiny here—will allow the matters covered in this rushed Bill to be looked at again, with the more detailed scrutiny the subject needs and deserves?

18:50

[The Lord Bishop of Leeds]

My Lords, I welcome this Bill and the speed with which it is being brought to us, but I share some of the concerns that have been represented already. I do not intend to go into any of the detail of matters that have already been spoken about; I am sure other noble Lords would be better at that than I might be.

I hesitate to bring an ethical argument because, in my experience in this House, ethical arguments simply get ignored. Indeed, one Minister replied to an ethical argument made on a different Bill by saying, “We will not listen to strictures on morality from anyone.” That led me, at the next stage—on Report—simply to say that that implies there is no place in politics for ethics. But it is my ethical concerns, which one might represent as cultural, that cause me to stand now.

Culture is not cleaned up by one act or one reaction to a particular stimulus, albeit a serious one such as the invasion of Ukraine. Some months ago, the Foreign Secretary threatened that sanctions would be introduced if Vladimir Putin invaded Ukraine. At the time, I thought that we should not be threatening that as a reaction to something else that happens. This stuff is immoral. The money that is sweeping through the sewers of London needs to be cleared up for its own sake, not simply as a bargaining chip in relation to Ukraine. If we are going to get rid of dirty money, we ought to do so because it is a moral obligation, not because it is a tactic.

If money is dirty and people are—we keep hearing the word—corrupt, is it that the money is indeed dirty and these people are indeed corrupt, or is it just that the game has changed, so it is now convenient for us to label them in that way? They were not corrupt six months ago, a year ago or five years ago—that was just the reality of the world in which we lived. If it is just the game that changes, and therefore we react to that, I think we have an ongoing ethical, cultural problem. We are tactical, and that is all. If we are going to change the culture, we have to be led by conviction rooted in values, not simply the pragmatics of the particularity of the case we are dealing with.

I am very pleased that an amendment will be tabled in Committee to Clause 18, so I will not say more about that now. I welcome the Bill, but I am concerned about the wider culture within which it sits; I hope that that will be registered, even if disagreed with.

18:53

[Lord Garnier (Con)]

My Lords, I thank my noble friend the Minister for her clear opening to this debate on this very important piece of legislation. It is also a pleasure to follow the right reverend Prelate and to hear what he had to say.

I refer to my interests in the register and declare that, as a barrister in private practice, I have been instructed both by the Serious Fraud Office and by companies and individuals in whom the Serious Fraud Office has taken an interest.

Sadly, the context in which we debate this Bill this evening is the Russian invasion of Ukraine. We are reviewing a Bill that has been passed through the other place in a single day and which will, I am sure, go through your Lordships’ House, if not in a day, quite quickly. Not surprisingly, the criminal and, some may say, paranoid behaviour of Mr Putin in launching this savage attack on Ukraine has led us into thinking that something must be done—and done quickly—to curb the financial freedom of Putin’s benefactors, his nominees and his enablers. These are people who, over the past 25 years, have grown rich through the redistribution to them of what used to be Russian state assets, first by President Yeltsin and then by the current incumbent. They remain rich because Putin permits them to be so, and because they hold vast holdings of valuable property and money throughout the West on his behalf. Although they pretend to be independent operators, they are puppets controlled by a sick and dangerous man, and it is right that our laws do not allow villainy to hide in plain sight.

Two points, however, flow from this. First, although the policy behind the Bill is well understood and universally shared by right-thinking Members of both Houses, the Bill that contains many complicated provisions, which are being considered very speedily. Of course, the war in Ukraine has forced us to act quickly, but the problems caused by passing legislation in a hurry are well known. Although I entirely accept the need for speed, we must be careful that we do not pass bad law which fails to hit the targets that we have identified. As my noble friend the Minister said, another economic crime Bill will be introduced in the forthcoming Session. The Government must stand ready to correct any defects in the current Bill which, through lack of proper consideration, are left in it. I hope it may be used to reform the law of corporate criminal liability—a subject on which I know I must sound like a cracked record.

Secondly, I do not want to be misunderstood in what I am about to say, but we must be careful not to allow our understandable moral indignation to cloud our judgment about what we need to do through this Bill. If there is one thing worse than failing to scrutinise legislation because of haste, it is to pass legislation while caught in a moral spasm. Hard as it is, although I have no doubt that your Lordships’ House and the Government are both capable of doing this, and although it is correct to have a moral purpose behind the policy—here I wholly agree with the right reverend Prelate—we have to pass a Bill now that works effectively for all times and all circumstances against all money launderers, every corrupt actor and kleptocrat from across the globe, not just the Russian ones currently propping up Putin.

Now is not the time to drill too far into the detail of this Bill, nor to lament that, had legislation of this sort been introduced soon after David Cameron’s anti-corruption summit in 2016 or shortly after the work of the Joint Committee on the Draft Registration of Overseas Entities Bill was completed in 2019—I was a member of that committee under the chairmanship of my noble friend, Lord Faulks—we would have considered it in an altogether less fraught atmosphere. That committee made a number of recommendations, which are now in this Bill, but we have lost three years. So I find it a little strange that in the other place Ministers claim to be acting with all due speed. But now is better than next year or never.

Having got that off my chest, I want to pick out a few points from the Bill for later consideration. We need to make sure that, in preventing the criminal concealment of the ownership of property in this jurisdiction, we encompass not only relevant individuals and overseas companies but the owners of shares in those companies, be they individuals, other companies or trusts, and the legal and beneficial owners of the shares. It is not difficult to set up a shell company in an overseas jurisdiction through a nominee. Unless the Bill and those tasked with enforcing the law, once enacted, can get to the actual owner, as opposed to being blocked through a series of impenetrable veils, we will get nowhere.

If what the Government want, as suggested in some government statements, is to reveal the real identities of foreigners who own UK property, we need to ensure that the Bill will achieve precisely that. The legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property. By Clause 33(1), the Secretary of State may by notice require an overseas entity to apply for registration in the prescribed manner within six months.

I agree with the concerns of the noble Lord, Lord Vaux, about the timing issues and the need to register entries on to the register, and I also agree with the noble Baroness, Lady Kramer, on the reduction of the 18-month period to six months. The Government should urgently take accountancy, legal and other professional advice about whether even six months is too long. Nowadays, money flows around the world at the press of a computer button. Should we not think of a far shorter period, with discretion for the Secretary of State or the High Court to extend that period on reasonable grounds in an individual case?

Unexplained wealth orders have not worked as well as they were expected to when they were introduced. Clause 53 allows for urgent designation of named individuals in certain circumstances. I hope the necessary work has already been done, because it may be that many such designations will need to be made immediately on Royal Assent. I have no doubt that the people we want to target will already have anticipated the Minister, and only the unwary minnows will end up being subject to these orders.

Finally, I need convincing that Companies House is the right body to enforce the provisions relating to the registration of overseas entities. It is essentially a recording organisation, a keeper of information provided to it by others. It is not, or not notably, an investigating or prosecuting body, but if it is to have this work, it will need a large injection of specialist staff from the Treasury, the sanctions sections of the FCDO, the National Crime Agency, the City of London police, which is the lead police force in relation to economic crime, and the Serious Fraud Office. It will also, I dare say, need to take additional advice from the security services, and all those agencies will need to be properly resourced to assist in this work.

The Bill must pass, but we must not think it answers all the questions that money launderers and other economic criminals will throw at us. If it assists us, even if indirectly, to get the Russian army out of Ukraine and persuade those supporting Putin to think again, it will most certainly have achieved some good.

19:02

[Lord Eatwell (Lab)]

My Lords, a considered assessment of this Bill requires some reflection as to why measures to thwart economic crime have failed so dismally up to now. At the centre of the Bill stands the registrar, embodied in Companies House. It is Companies House that is the prime source of the failings that have made London the money-laundering capital of the world. One of the political pantomimes of the last 10 years has been the spectacle of Conservative Prime Ministers referring regularly to the register maintained by Companies House as a gold standard, a beacon of openness, an example to the rest of the world. In reality, the manner in which the register is constructed has been and remains the key element in the inability of this country to stem the inflow of dirty money and the total failure to slow the growth of economic crime.

As has been known for years, the scandal derives from the fact that Companies House does not verify the beneficial ownership of the companies registered. Companies House is a library in which any shameful book can be deposited, as the noble and learned Lord, Lord Garnier, has just argued. That so many shameful books have been deposited is a matter of record. By the way, Companies House has led one prosecution in 150 years. That was of a person who deliberately registered a false company in the name of government Ministers to show how hopeless Companies House was at verifying the data. It then prosecuted this man when he owned up to what he had done.

Today, the Companies House register includes about 4.5 million UK businesses, but it operates in much the same way as it did 150 years ago, meaning that criminals have been able to set up seemingly legitimate shell companies without even the most basic identity checks. A study by Professor Jason Sharman of Cambridge University found that it was impossible to establish a shell company in the Cayman Islands, the Bahamas or Jersey, but easy to do it in London. A further study by Transparency International, in November 2020, reported that British shell companies were implicated in nearly £80 billion worth of money-laundering scandals. On top of that, the anti-corruption group Global Witness reported in 2019 that more than 336,000 companies on the register did not disclose their beneficial owner. It also found that just over 2,000 company owners were actually directors who had been disqualified, yet they were accepted by Companies House. It is this same organisation that we now ask to do more: to manage the new register of beneficial ownership of real property envisaged in the Bill.

In assessing whether Companies House can actually do the job, it is important to dismiss the comfortable fantasy that an open register provides sufficient scrutiny to detect wrongdoing. Protection against even moderately sophisticated financial crooks is provided only by verification and regular reverification of beneficial ownership by skilled forensic accountants. This fact was acknowledged by the noble Lord, Lord Callanan, in his foreword to the September 2020 White Paper Corporate Transparency and Register Reform—note that this was a document published two years ago.

The section on verification is to be found in Clause 16. Clause 16(1) refers to verification of information before an application is made by the overseas entity—that is, before the registrar is even aware of the application. I am sure that noble Lords have noticed that the wording of Clauses 4(1)(c), 7(1)(d) and 9(1)(e) indicates that the task of verification is assigned to the overseas entity. The Government may take some comfort from that, but I assure them that I do not. Clause 16(2) refers to

“the person by whom the information must be verified”,

and

“evidence or other information to be delivered to the registrar”.

Again, this suggests verification by a person other than the registrar, Companies House, to which the information is to be delivered, all ready, tied up with a fancy ribbon and a label reading “Nothing to see here.”

Nowhere in the Bill can I find a statutory obligation for the registrar, Companies House, to verify the data submitted to it. The Institute for Government has noticed the same omission, saying that

“without strengthening the organisation—expanding its powers of inquiry and resources to investigate and remove false information, and requiring mandatory identity checks on those incorporating companies, on company directors and on those who ultimately control companies—the new register could have little impact.”

There is also a clear suspicion that the Government are not willing to provide the resources the job requires, as the noble and learned Lord, Lord Garnier, pointed out earlier. To quote the Institute for Government again:

“the provisions in the new bill will make little difference unless authorities are provided with additional resource to enforce them … the UK already has strong tools to target illicit funds but law enforcement agencies have struggled to make full use of them because of resourcing issues.”

In her introduction, the Minister informed the House that a new economic crime Bill, including reform of Companies House, will be brought forward in the next Session. This has been promised time and again by this Government: it is always in the next Session—and the next Session never comes. On verification, we must act now. Making the verification of data by the registrar a statutory requirement is essential if the Bill is to be a meaningful measure and not just another PR exercise. Without a statutory requirement for verification by the registrar, and without the resources to do the job, this House will be participating in a sham. We must ensure that this is not the case.

19:09

[Lord Carlile of Berriew (CB)]

My Lords, it is a pleasure to follow a speech of such forceful clarity as we have just heard from the noble Lord, Lord Eatwell. I should start by declaring my interests. The first is similar to those declared by the noble and learned Lord, Lord Garnier, as a practising barrister, although these days I do not do contentious advocacy in courtrooms. The second is that I am the director of a consultancy company that provides advice to foreign entities and foreign individuals—although, I hasten to add, not Russians. I shall say a little about the sort of interests that arise in a few moments.

In ordinary circumstances, I suspect that many of us in your Lordships’ House would be reluctant to support a Bill such as this without the normal debating time that we are given in conventional legislation. A high degree of trust is being placed in the Government to ensure that the Bill reaches the statute book fit for purpose and is applied in a way that means it will bite. However, we are in extraordinary circumstances. There is no doubt that the war being conducted by President Putin, and indeed Russia, against Ukraine is funded at least in part by the product of money that has passed, and passes, through the United Kingdom, and that it is in many ways money that has been obtained illegitimately through the plundering of the public purse of Russia.

That is brought into high relief today by the news that the Mariupol children’s hospital was bombed by the Russians, including its maternity unit, and the photographs of what is left are terrifying and ghastly. Russia has now become a clear enemy of international law, and its agents, including its oligarchs, have no right to expect us to apply in full our normal ethical legal standards to their behaviour, as in their complicity with the Russian state. Indeed, our prime task, alongside doing whatever we can to assist Ukraine, is to protect our own country, the United Kingdom, against being used as an unwitting instrument of international crimes against humanitarian law.

I shall start in substantive terms by referring, as others have, to unexplained wealth orders. I echo what was said by the noble and learned Lord, Lord Garnier, and my noble friend Lord Vaux in their very eloquent speeches. UWOs have been around for a long time but it is a fact that very few proceedings have been taken by the National Crime Agency. There have been four cases, of which one failed. I can tell your Lordships that around the members of the legal profession that I speak to, and there are many on a daily basis, there is astonishment that the NCA has not brought scores of applications to court for UWOs. The reason for that is plain and twofold: one is the risk of costs, which can be dealt with, but the other, which is more difficult to deal with, is that the NCA is simply horribly understaffed to deal with these cases. It is not that there are not people who could do it, but we have to commit to employing those people and they have to be of sufficient quality. They need to be good lawyers and good investigators so that we are not standing here in a few months’ time saying, “The NCA really hasn’t been effective”.

Then, as the noble Lord, Lord Eatwell, referred to, there is the role of Companies House. It just so happens that professionally, in my consultancy company, I made an application on behalf of a client to Companies House some weeks ago now, in full detail, for a company to be deregistered. The evidence in the case could not be clearer. The company concerned is an impostor; it is pretending by its name and its fraudulent activities to be a very great international entity, but it is not—it is just a bunch of fraudsters. It is probably six weeks since I sent that application to Companies House. It is not just that they have not done anything; they have not even acknowledged—apart from the most formal immediate acknowledgment—the receipt of the application that I put in on behalf of my client. So I am absolutely with the noble Lord, Lord Eatwell: Companies House either is not fit for purpose or has to wake up and achieve that part of its purpose. Companies House, like the NCA, needs the staff to deal with these issues because it does not have them.

I have two other substantive points. The first I raised in the debate on Ukraine on 28 February, which was answered clearly, eloquently and helpfully by the noble Lord, Lord Ahmad of Wimbledon. My point relates to law firms and, indeed. other professionals—I deliberately turn to a chartered accountant when I say that—who, mostly in perfectly proper circumstances before this conflict arose, without any breach of law or ethical standards, have been involved in actual or intended transactions that may well have brought financial benefit, and therefore belligerent facilitation, to the Russian state. Some of those are property transactions, although not all, and some are transactions that are worked on but not fulfilled. A great deal of work is going on in law and other professional firms in relation to transactions that benefit the Russian state and it could tell us a great deal about what the Russian state is doing, as well as revealing criminal activity. I hope there is no single lawyer in the UK, whether in the square mile or elsewhere, who would find it ethically acceptable to bring benefit to an enemy of the United Kingdom, but the opacity of the sorts of transactions that I am describing means that lawyers and other professionals may well be complicit—entirely unintentionally, although there are of course rogues in every profession—in the sorts of transactions that I have referred to.

It is important that legal professional privilege should continue to apply to legitimate transactions. I hope that no one in this House wants to wipe away legal professional privilege in a transaction because someone happens to be a Russian; after all, there must be some very respectable Russians around because quite a lot of them have given money to one of the major political parties in this country. I hope that will not be taken amiss, but as far as I can tell it is true. So how do we achieve the scrutiny of such transactions?

After the debate on 28 February, I wrote to the noble Lord, Lord Ahmad—I have not heard from him yet but this was very recently so I would not have expected a reply—suggesting that we should adopt the architecture of the National Security and Investment Act 2021, an architecture that is now up and running in, among other places, the Ministry of Defence, with a substantial group of people working on it. They are applying the national security principles, the 17 national security categories, that are exactly relevant to the sorts of transactions that I am referring to. I respectfully suggest to the Government that they should adapt the NSIA architecture to a register of transactions by lawyers that lawyers and other professionals would have to report in clearly described circumstances, even though legal professional privilege would continue to apply as an inviolable principle unless there was an effect on our national security, as described in the NSIA. It seems to me that that sort of architecture would satisfy what is in my view a need for professional firms, if they participate in transactions that now seem to be politically dubious apropos the Russians, to be examined.

The other issue I wish to raise is about non-Russians who own property in London. A significant number of special purpose vehicles have been created for well-known foreign people to purchase. These people are huge investors in this country—entirely honestly, in good faith and with strong ethical standards—who do not wish it to be known that they, as individuals, are the beneficial owners of those properties. They have good reasons. One good reason, as one might think, is simply to protect their privacy from unwelcome curiosity and criminals. Another possibly legitimate interest may be to protect themselves from unwanted curiosity from overcurious journalists. A third reason, and possibly the most important, is for national security issues—not ours, but theirs for the country in which they live.

I will briefly give a couple of examples. I remind your Lordships of the events of 2 October 2018 when Jamal Khashoggi was murdered in Istanbul by agents of Mohammed bin Salman and the Government of Saudi Arabia. This is an example of a Government finding out everything they need to know so that they can take out an enemy of the state in completely unlawful circumstances—in a friendly country—through an outrageous and brutally executed crime. People are entitled to defend themselves against that, as are the victims of Russian-led incidents. On 23 November 2006, in Bloomsbury, just yards from my own office in Gray’s Inn Square, Alexander Litvinenko was taken out by the Russians. By whose agents was he murdered on our territory using radioactive material? Vladimir Vladimirovich Putin. Perhaps we should have been warned then. Afterwards, there were the shocking events which took place in Salisbury and affected life in one of our most beautiful cities.

When he replies, I would be grateful if the Minister could confirm that, when registration is required, the legitimate privacy and interests of good foreign investors will be protected under the provisions of this Bill, particularly Clauses 21 to 25.

Finally, I apologise for not being able to be here next Monday when the Committee takes place. This is because I have a long-standing commitment aboard, otherwise I would have come to contribute further.

19:22

[Lord Thomas of Gresford (LD)]

My Lords, for over 50 years, it has always been a privilege and a pleasure to speak either before or after the noble Lord, Lord Carlile.

Last Friday, the Guardian reported that the Foreign Secretary, Liz Truss, has asked government lawyers to “find literally any way” to crack down on SLAPPs—strategic lawsuits against public participation. On the same day, Reuters reported the view expressed by a number of Members of Parliament, including Conservative MPs, that British sanctions on Russian oligarchs are being partly delayed over concerns that wealthy businessmen will take the Government to court unless they have built solid legal cases against those targeted. As the noble Lord, Lord Carlile, pointed out, they do not have the cash—or the organisation within the police departments which deal with this—to do that. I ask the Minister: does this account for the Government dragging their feet on sanctions—particularly now, as others have already mentioned, that they are giving six months to Russian oligarchs in this country to liquidate their assets? I regret that the Government have not taken the opportunity in this Bill to deal with the urgent problem of SLAPPs; nor was it in the list announced for Part 2 by the Minister.

The British justice system is undoubtedly not world-leading in this area. Other common-law countries, including the United States and Canada, have brought in anti-SLAPP laws which enable a journalist or publisher to apply to the court at an early stage for a law suit to be dismissed, if it relates to content which is in the public interest. Consequently, the Foreign Policy Centre has described the UK as

“the most frequent country of origin”

for foreign legal threats against investigative journalists. The journalist Catherine Belton wrote a book called Putin’s People: How the KGB Took Back Russia and Then Took on the West. Among other things, she wrote that sources had informed her of Putin’s plan to acquire Chelsea Football Club through Abramovich to increase his influence and to raise Russia’s profile, not only with the elite but with the British people. If that was his plan, the chanting of Chelsea supporters last weekend, interrupting the applause for Ukraine at Burnley, shows that Putin has succeeded in his object. Putin has succeeded in distorting British values of freedom and democracy, at least among Chelsea fans. Catherine Belton’s book was highlighted by the opposition leader Alexei Navalny from his prison cell in January last year when he revealed, among other things, that Putin secretly owned a £1 billion Black Sea palace. She was hit with libel actions from Abramovich, who was quickly joined by other oligarchs and the leading state oil company, Rosneft. Abramovich also sued her in Australia, where the book had been published. Miss Belton’s publishers, HarperCollins, stood bravely by her. The result of this hugely expensive litigation was some minor alterations to a few sentences in her book without the payment of any damages or costs. Another similar case was brought against the Financial Times investigative journalist Tom Burgis by the Kazakh mining company ENRC. As my noble friend Lady Kramer said, there are enablers. Solicitors for the oligarchs in this litigation include the well-known London firms Mishcon de Reya, Schillings, Harbottle & Lewis, CMS and Carter-Ruck.

I have answered Ms Truss’s call by drafting a Bill which is currently in the queue for a First Reading in this House. I am very happy to share this with the Government at this early stage. It is based on the Ontario legislation which was recently considered and approved in the Supreme Court of Canada. Essentially, my Bill provides for a defendant to apply to the court at an early stage to dismiss the proceedings where the judge is satisfied that the proceedings arise from a publication relating to a matter of public interest. It is then for the claimant to satisfy the judge that the proceeding has substantial merit, and that the public interest in permitting the proceedings to continue outweighs the public interest in protecting the publication. In weighing the public interest, the judge may take into account a variety of factors, including the chilling effect of the proceedings on any future investigative journalism and any disproportion between the resources deployed and the amount of damages likely to be awarded. The judge would have power to award damages to the journalist or publisher where he concludes that the proceeding has been brought in bad faith or for an improper purpose. I had thought of seeking to amend this Bill with these provisions, but I do not think they would come within the Long Title, nor would there be time—as the noble Lord, Lord Carlile, said—to adequately debate them. But this is a way to crack down on this abuse of our judicial system, and I look forward to the Government giving time for my Bill, or their own time to deal with the matter.

19:29

[Lord Rooker (Lab)]

My Lords, I very much agree with the contents of virtually all the speeches we have heard so far. The right reverend Prelate the Bishop of Leeds said that he wanted to introduce some ethics into the debate. I deeply regret that before I finish I shall introduce some politics into it. The constant theme in the House of Commons on Monday was that alarm bells have been ringing for years and been ignored by the Government. It is sad to say that this is an entirely fair point to make. I shall therefore go through a bit of the history. I make no apology for saying “I told you so”.

In March 2015, Transparency International published a detailed analysis, Corruption on Your Doorstep: How Corrupt Capital is Used to Buy Property in the UK. I will not go into any of the details given there but the Government knew about it because I initiated a debate on it on 18 June 2015. The present Government Chief Whip replied.

Another alarm bell around the same time was rung in the Financial Times on 6 June 2015, when it reported that more than half the homes costing £1 million-plus were being bought with cash. The newspaper reported that 76% of the most expensive homes costing above £5 million were paid for by entirely by cash. Alarm bells?

In Singapore in July 2015, the then Prime Minister made what I have said previously was a seminal speech on corruption, which was never really followed up with action, even though that Prime Minister said in his 2017 lecture on corruption that he thought action was being taken forward. He was taken in.

In early 2016, Roman Borisovich launched the Kleptocracy Tours. The idea was to show people what it was all about—to visit locations and explain about the owners, or what was known about the owners, the lavish properties and something about the sources of wealth. That was before the emergence of unexplained wealth orders, a matter raised in the original Transparency International report. The tours started in Whitehall and went through Knightsbridge, South Kensington, Hampstead, Highgate and so on.

I shall highlight just two examples and I shall do so because I have done it before—at least four times. There is no argument about what has been going on and been ignored by the Government. The start was outside the Igor Shuvalov’s property at 4 Whitehall Court, which are two apartments, now knocked into one—138a and b—and are above the Farmers Club for those familiar with the location. This apartment was worth more than 80 times Mr Shuvalov’s annual income as a Russian government official. Due diligence there was none. The extract from the Russian registry of companies disclosed the beneficial ownership of Sova Real Estate by Shuvalov and his spouse. The purchase price of £11,440,000 is well known. The lender: none. The London end was cared for by Tulloch & Co of Hill Street.

My other example is relevant for two reasons. The person is Ukrainian and the sellers of the property were the UK Government. There is much more detail. When I prepared this speech, I saw the “Long Read” in yesterday’s Guardian by Oliver Bullough, so the details are there. It relates to a property that I have driven past for decades on my way here—a dwelling attached to the old Brompton Road Tube station. Dmytro Firtash paid over £100 million for it. He made his fortune selling Russian gas to Ukraine. He was living in Austria fighting extradition to the United States on bribery and racketeering charges. That continues today.

The matter is relevant because the Tube station closed in 1934 and during the war was used for various matters related to the Anti-Aircraft Brigade. In 2014, while Mr Firtash was still in Austria fighting the extradition charges, the owner of the site—the Ministry of Defence—sold it to him. He claimed that he wanted to convert it to residential use. He paid £53,375,000 to the Secretary of State for Defence. The property now still appears to be three separate buildings but is in fact one. In June last year, according to Reuters, the Ukraine Government headed by President Zelensky imposed sanctions on Firtash for selling products that ended up being used by Russian military enterprises. Did the MoD do any due diligence before the sale of its property? It was known that Firtash was in Austria—he was not living there. I asked about this some years ago and was simply fobbed off.

I should say in passing that the tour went past the house of Roman Rotenburg, owned through a Cypriot company. He received his father’s and uncle’s sanctioned foreign assets in 2015. I mention that only because others in this House are more capable than me of explaining the background, although they are not here tonight.

If the Government are still pleading ignorance, in 2018 along came Moneyland by Oliver Bullough. I will quote a brief extract from the flyleaf, which states:

“Once upon a time, if an official stole money, there wasn’t much he could do with it. He could buy himself a new car or build himself a nice house or give it to his friends and family, but that was about it. If he kept stealing, the money would just pile up in his house until he had no rooms left to put it in … And then some bankers in London had a bright idea.”


These matters and other examples were raised again and again, especially during the passage of both the Criminal Finances Act 2017 and the Sanctions and Money Laundering Act 2018. So why has no action been taken until Ukrainian blood is being spilled at the level it is today? The Bill is a token because it has been brought about only because of that. The issue was always there anyway. Our economy is being distorted at a crude level because if half the money disappears all at once it will be highly damaging. But we knew that because we knew that the money was coming in.

The impact assessment for the Bill, which the Minister signed on 25 February 2022, on page 5 uses as a reason for action the very report from Transparency International in 2015 that I mentioned at the start. That was seven years ago. The impact assessment to justify the Bill is based on something that the Government knew about seven years ago and has been repeatedly raised with them—but they did nothing about it.

I am not going down the road of the former Prime Minister, when Home Secretary, refusing the inquest into the death of Alexander Litvinenko because of “international relations”. Then there is the present Prime Minister, who is so close to the Russian KGB family that he dumped his security detail to go to meetings and parties—one of which was the in the week of the first Covid lockdown in March 2020. Missing five COBRA Covid meetings was okay because the top priority was to report to the Russian he could not get into this House at the time.

The common theme is the active involvement of both those top UK Government members in fundraising events—all on the record—to obtain Russian-based money into the Conservative Party. This has spread to many other Ministers. I cannot understand it. Constituency parties in this country have received donations from people who are living here legitimately and are on the electoral register. Did those constituency parties not ask why this money is coming in? We do not really need to ask any more, do we?

19:38

[Lord Faulks (Non-Afl)]

My Lords, I am not sure I can follow that. I should declare an interest as a practising barrister, but not one with any relevant interests so far as this debate is concerned. We of course understand why the Bill is being rushed through Parliament, but I fail to understand why the Government have taken so long to respond to what was staring them in the face.

To take up the story from the noble Lord, Lord Rooker, I was excited by the Criminal Finances Bill in 2016. It borrowed ideas from other jurisdictions but did not, in my view, go far enough. The noble Baroness, Lady Williams, not currently in her place, will recall the criticisms I offered then of unexplained wealth orders and of the omission altogether of a property register that would help to identify the true owners of choice London property. My amendments were not accepted by the Government. Sadly, not many in your Lordships’ House, with notable exceptions—I see some of them here today—seemed particularly interested in that Bill.

Then came the Sanctions and Anti-Money Laundering Bill in 2018, which attracted rather more interest—although most noble Lords seemed concerned to protect those who might be capriciously or unfairly sanctioned. The noble Lord, Lord Hodgson, and I put down amendments in 2018, once again to set up a property register—mysteriously omitted from the Bill. I was prepared to vote against my own party on this. I was placed under considerable pressure to withdraw my amendment. I was told, among other things, that it was too complicated to do in the 12 months I suggested in the amendment. I was given lavish assurances by the Government, and a timetable. Neither the assurances nor the timetable were adhered to.

In the meantime, other noble Lords had rather more luck with their amendments to the Sanctions and Anti-Money Laundering Bill. The noble Lord, Lord Pannick, who has recently been much criticised in the newspapers, and the noble and learned Lord, Lord Judge, put down amendments that were in fact perfectly conventional, rule-of-law safeguards. They were supported in those amendments by the Labour Party and the Liberal Democrats. In fact, the Liberal Democrats wanted to go further; it seemed to me that the effect of one of their amendments would have made areas of our foreign policy justiciable. This is partly explicable by the fact that the debate on these sanctions came immediately after Brexit, and everybody’s minds, at least for the most part, were not directed towards Russia.

In Committee and on Report I spoke against all the amendments. It was not that I wanted arbitrary imposition of sanctions, but it seemed to me that our foreign policy needed a degree of flexibility. It must be remembered that sanctions are essentially a tool of foreign policy. The Government were wrong to compromise, as they did, in relation to these amendments. The position now, of course, is that the oligarchs we wish to sanction will have the benefit of the finest legal minds that money can buy to represent them.

I recommend that noble Lords read pages 46 and 47 of the Explanatory Notes to the Bill. They are certainly the longest Explanatory Notes I have ever read in relation to the European Court of Human Rights. It seems to me that the civil servants advising the Minister have said that, as a result of the amendments to the Sanctions and Anti-Money Laundering Act and elsewhere, it will be very difficult indeed to sanction anybody. Paragraph 230 says that Part 3 of the Bill

“potentially engages the following provisions of the European Convention on Human Rights: Article 6 (right to a fair trial), Article 8 (right to respect for private and family life) and A1P1 (respect for peaceful enjoyment of possessions).”

I am sure we all hope that the oligarchs can have peaceful enjoyment of their possessions. The European Convention on Human Rights was not designed to protect people like them.

I hope the Minister can assure me that the government amendments will be enough to defeat the legal might of the oligarchs. In this context I recommend the suggestion made by Professor Ekins and Sir Stephen Laws in their Policy Exchange paper, published this week in the Spectator, about a way of doing this without encountering some of the difficulties I foresee.

On the subject of the Human Rights Act, in 2015, together with the now Deputy Prime Minister, I was given policy responsibility for a British Bill of Rights. It never saw the light of day, despite our best efforts. In your Lordships’ House I was regularly upbraided at the Dispatch Box for even contemplating an amendment to the Human Rights Act, let alone leaving the Council of Europe. I was told it would send a bad message to Russia and Belarus as fellow members. We are still members of the council, but it does not seem to have much inhibited Russia or Belarus as they trample over the human rights of the brave people of Ukraine.

Then there was the Joint Committee, which I was privileged to chair, with the noble and learned Lord, Lord Garnier, as a member. It was entirely apolitical in the sense that all parties agreed to a number of important things that we thought could be done to the draft Bill, including verification—already much mentioned—and trying to get rid of the problems of trusts that could be used to bypass some of the protections. We stressed how important the timing was and how urgent it was. The timetable is in fact recorded in our report—a timetable not adhered to by the Government.

We have allowed ourselves to be the receivers of stolen goods in this country. We have seen the murder of Litvinenko and the Salisbury poisonings. Reputable sources suggest that as many as 10 or more murders are attributable to Russia. Ukraine is not our fault, but we have embraced the Russian oligarchs and Putin’s henchmen.

The Explanatory Notes say the Bill has been introduced as part of Her Majesty’s Government’s

“urgent response to the Russian invasion of Ukraine.”

It contains some useful provisions, which I thoroughly support and which can no doubt be improved when the next Bill comes along. But it should never have been necessary to come to this.

19:46

[Lord Hannay of Chiswick (CB)]

My Lords, the Bill we are debating today is long, long overdue. Part of this delay resulted from the shameful decision to block publication of the report produced by the Joint Committee on Intelligence and Security on Russia’s activities in this country. Whatever excuse was dreamed up to justify that delay, it can now be seen as a blunder and as being responsible for the fact that in this instance the UK is not, as the Government like to claim, a world leader but rather a “world catcher-up”, well behind the US and the EU.

However, it would be wrong not to welcome the Bill’s likely passage into law later this month—all the more so as during my intervention in the emergency debate on Ukraine on 25 February, the day after the Russian invasion, I called for the Bill to enter into force during this Session of Parliament and not the next. This will now happen, and it is right to applaud that, as well as the announcement today of a further Bill for the next Session to go into greater detail. But, since speed is of the essence, it would surely make sense to cut the six months allowed for registration to a figure close, or at least closer, to the 28 days suggested in the other place. Surely the Government could accept some compromise on that.

Legislative action of the sort proposed—the sort we are debating this evening—is only a first step in a complex operation. Of far greater practical significance will be the skill and energy with which it is implemented and enforced once it is on the statute book. I hope that when the Minister replies to this debate he can assure the House that serious and detailed preparatory work is already being put in hand, so that action under the new law will not be unduly delayed. Will he also undertake to keep Parliament regularly informed of progress in enforcement if and when the Bill becomes law?

Of course, the Bill is about more than just bringing to book Russian institutions and individuals linked with illegality in general, and in particular with the war crimes being committed daily in Ukraine by the Russian state. It is another very necessary step in the battle against corruption worldwide, which began promisingly —if, again, somewhat belatedly and after considerable delay—with the Bribery Act. Like this Bill, that Act recognised that corruption anywhere in the world invariably involves more than one person or entity, and that the proceeds of corruption often end up an awful lot closer to us than we would wish.

It is all too easy to comfort ourselves with the thought that most corruption occurs somewhere else, often thousands of miles away, and has nothing to do with us—easy, but wrong. This Bill should provide a shot in the arm for the battle against corruption, which is a proclaimed and worthy objective of successive British Governments but has so often fallen short in the execution; just look at the reports of Transparency International if you doubt that. Russia’s aggression against Ukraine, in contravention of its international obligations from the UN charter onwards, is a salutary reminder of the urgent need for us to defend the rules-based international order.

This Bill is part of that defence but mere words will not be enough, especially as, only yesterday, on our Order Paper was another Bill—the Nationality and Borders Bill— that seeks to allow the Government to act in contravention of the 1951 refugee convention. It is, frankly, Orwellian to assert that Parliament alone has the right to interpret what is and what is not in conformity with the convention. That is the language of President Putin and not ours.

19:51

[Lord Londesborough (CB)]

My Lords, as we know, Russia’s invasion of Ukraine has triggered the fast-tracking of this Bill to address the burgeoning and multifaceted industry of economic crime. If this Bill is viewed as a quick fix to address the UK’s shameful and enabling embrace of corrupt oligarchs, we should note that the so-called London laundromat has also been exploited by kleptocrats across a wide range of nationalities, not just Russians.

The British sense of fair play is an expression we hear less of these days. That is not hard to understand when you read the Treasury Select Committee’s somewhat embarrassing but honest sizing up of economic crime in the UK:

“It seems that it can reasonably be said to run into the tens of billions of pounds, and probably the hundreds of billions.”


The actual cost to the UK economy of serious and organised economic crime is conservatively estimated at £37 billion per year. That is more than three times the expected increase in revenues generated by the new rise in national insurance contributions.

Given the urgency, this Bill is necessarily narrow in scope, with a focus on the registration of overseas entities and land and property ownership. However, as we know, UK service firms and their clients have been involved in a whole range of enabling activities across numerous sectors, including banking, private company investment, consulting and advisory services, estate agency, sportswashing and lifestyle management.

This Bill seeks to address the troubling issue of unexplained wealth given that we have become a magnet for rich businessmen from poor countries with abnormal levels of wealth. I include Russia as a poor country; last year, its GDP per capita was just over $11,000 and it was ranked 85th in the world. This year, it is likely to fall below 100th, yet it boasts 117 billionaires; that is the fifth-highest number in the world. My point is that you do not need to be a forensic economist to spot unexplained wealth.

I witnessed this at first hand 15 years ago. A Russian media company launched an unsolicited takeover offer for an information business that I was running at the time. The offer was way in excess of the fair market value and the company conducted zero due diligence. We resisted after discovering that our suitor had powerful political connections in both Moscow and Beijing, and had a seemingly bottomless war chest despite never having generated a penny of profit in its history. The most unedifying site was the long line of British advisers, lawyers and accountants acting on its behalf. I see much in this Bill aimed at the sources of dirty money but little to address the enablers.

Turning to the Bill’s specifics, I have four brief points to make. First, as many noble Lords have already pointed out, shortening the transition period for overseas companies to register their beneficial owners from 18 months to six months is inadequate. I suggest that three months strikes the right balance between urgency and the important aspect of allowing bona fide beneficiaries the time to register.

Secondly, fines need to be proportionate and a deterrent. The average property transaction value for oligarchs in the UK is around £15 million, so fines of £500 or £2,500 a day are insufficient. I suggest that, for the first day of contravention, a fine of around 1% of the property value would be more appropriate.

Thirdly, I am an entrepreneur, not a lawyer, but the drafting of the overseas property legislation seems to need tightening up. I believe that individuals would still be able to hide their true identities through nominee agreements with professional service firms. Closing the “no person of significant control”, or PSC, loophole is another key priority.

Finally, as many noble Lords have pointed out, enforcing the new rules of the Bill requires proper resourcing. Our spending for national agencies fighting economic crime is around £850 million per year, set against the money laundering cost to the UK economy of perhaps as high as £100 billion. No wonder conviction rates have been so low.

This Bill is far from perfect but I will support it, mindful that the Government are planning to bring in a second economic crime Bill in the next parliamentary Session that should—indeed, must—address the many other issues of a complex and menacing industry.

19:57

[Viscount Colville of Culross (CB)]

My Lords, I was the BBC’s Moscow producer for “Newsnight”. I have been back many times to make television programmes in Russia. Throughout that time, Russians often spoke admiringly of the UK as a bastion of political stability and democratic freedom. It is ironic that the British ideals and institutions they so admire have been repeatedly traduced by the Russian elite. Few Russians have had the political influence and absolute ruthlessness to become oligarchs, but they have been drawn to the great honey pot of the City of London to hide their wealth and live lives of unimaginable opulence. Many are people who surround Putin.

They live in stark contrast to the vast majority of Russians, who are desperate pawns in his heinous plans. As if proof was needed, only yesterday, the mothers of Russian soldiers fighting in Ukraine told how their sons had been forcibly signed up to the army for a salary of £180 a month—a subsistence wage that barely helps you live in rural Russia. They even had to buy their own uniforms. One mother said that she had a text from her son Nikolai two weeks ago saying that he was on a drill and was going to continue drilling. Since then, she has not heard from him and fears the worst.

I am pleased that our Government have started to sanction Putin and the elite who surround him. I hope that this Bill will be used to extend sanctions to at least 1,000 people around Putin—not just Ministers but members of the Duma, all the military and security service leaders and, most importantly, their families. Putin does not care what happens to the people of Russia but he does care about what happens to those around him. I, like many noble Lords, welcome the Economic Crime Bill and add my calls for its companion Bill to follow shortly.

According to Transparency International—it has been mentioned many times in this debate—hundreds of oligarchs from around the world own property in the United Kingdom, many of them Russians. If you count corrupt politicians and public officeholders, the figure is higher. The NGO calculates the known value of assets in the UK bought with suspect wealth to be at least £6.7 billion, although it adds that this is likely to be the “tip of the iceberg” given how little we know.

I welcome the property register of oversea entities set out in this Bill. It is good to know that the United Kingdom Government have finally decided to track down the beneficial owners of so much property in this country. My concern is that much of it is held by companies registered in the Crown dependencies and overseas territories.

The sanctioned oligarch Alisher Usmanov, said to be worth £13.4 billion, bought the grade 2 listed Beechwood House in Hampstead in 2008 for £48 million. It is owned by a company called Hanley Ltd, based in the Isle of Man. Likewise, the industrialist Oleg Deripaska, who is sanctioned in the United States—but not yet here—for close links to President Putin, has a multimillion house in Belgrave Square. It is owned by Ravellot Ltd, registered in the British Virgin Islands. Transparency International estimates that £1.5 billion-worth of London property is owned by Russians, 55% of it registered in the CDOTs. I am pleased that the new register will identify the true beneficial owners but, like my noble friend Lord Faulks, I am concerned about what happens if they decide to sell the company’s shares to a new owner, possibly another friendly oligarch. The new beneficiary will have to be notified in the register, but only during the annual update. That gives the original beneficiaries plenty of time to salt away their wealth from the shares they have sold. I ask the Minister to consider more frequent updates of true beneficiaries on the register.

The registers of companies established in the CDOTs allow UK authorities only to make a search on individual companies, but many oligarchs and money launderers hide their money in a web of companies. The only way this can be uncovered is for the Government to request full access to their registers so that authorities can take an overview and piece together the web. At present, the registers will be open in over 21 months’ time. Some overseas financial centres such as the BVI, however, already have a professionally maintained up-to-date BOSS register. It would take only a short time for that to be made public. I ask the Minister to ensure that the Government do everything in their power to open these registers this year and uncover the truth about the wealth of so many Russian oligarchs, including Putin and his friends.

The other area which concerns me is the huge growth in SLAPP orders, so eloquently described by the noble Lord, Lord Thomas of Gresford. Recently they have been used aggressively by oligarchs and corrupt players around the world to close down exposure of their wealth and, in the case of many Russians, their links to the Kremlin, by journalists and writers in this country. I am proud to have helped shape the Defamation Act 2013. Its threshold of a publication that

“has caused or is likely to cause serious harm to the reputation of the claimant”

was successful for a time in controlling libel tourism. But new threats of defamation, breach of privacy and data protection are being used by British lawyers to intimidate journalists and writers. These cases can be time-consuming and costly, involving an expensive and lengthy disclosure process, continuing for many years and dragged out by rich claimants. The noble Lord, Lord Thomas, mentioned the cases of Catherine Belton and Tom Burgis, to name but a few.

In researching this speech, I have spoken to a number of journalists writing about Russian wealth, who have received very aggressive legal letters. Not only do they threaten a list of legal actions, but even the letters themselves are secret. The recipients were threatened with actions for breach of confidentiality or even copyright if they made the letters public. I have obtained one such letter from a leading London law firm to a freelance journalist who exposes corruption on a regular basis. They were threatened with breach of privacy and given severe warnings against mentioning the law firm unfavourably. I fear that these SLAPP orders pose a chilling effect on free speech in this country. During the debate on the Bill in the other place, the Minister announced that Dominic Raab has made a call for evidence. I hope that this includes setting up a bespoke judicial mechanism tailored to look at these orders at an early stage to decide whether publication is in the public interest. I also support the noble Lord, Lord Thomas, if his Private Member’s Bill comes before the House. Meanwhile, can the Minister confirm the scope of this call for evidence and when it might conclude its findings?

We need to rid this country of its reputation as a safe haven for corruption and criminality. We need to clamp down on the activities of Putin’s people and their families. I look forward to a second Bill coming before the House very soon to close the other glaring loopholes, especially at Companies House.

[Lord Rogan (UUP)]

My Lords, the scenes in Ukraine that the world has observed in our newspapers and on our television screens over the past two weeks—

[Lord Sharpe of Epsom (Con)]

I am afraid that the noble Lord was late to the start of the debate.

20:04

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will set out the context for the Bill and look at some of the bigger ways forward, while my noble friend Lady Jones of Moulsecoomb will concentrate more on its details.

[Baroness Jones of Moulsecoomb (GP)]

Will I?

[Baroness Bennett of Manor Castle (GP)]

I am sure she will.

Unoriginally, I begin by noting that a year is a long time in politics. In January 2021, we had Second Reading of the Financial Services Bill in your Lordships’ Chamber. The noble Lord, Lord Agnew of Oulton, was on the Front Bench, proclaiming with apparent pride that the UK had

“unwavering commitment to high-quality, agile and responsive regulation”.—[Official Report, 28/1/21; col. 1810.]

I said:

“We are a major global centre of corruption. The City is an Augean stables and the Bill is clearly sparing in its distribution of shovels.”—[Official Report, 28/1/21; col. 1861.]


It is clear that Greens lead in recognising problems, with others following eventually, and we offer solutions. I have joined many others—I note the leadership of the noble Lord, Lord Wallace of Saltaire, in particular—in calling for an end to golden visas, a long and disgraceful saga threading through Governments of three political hues that eventually, very late in the day, has finally been cut off.

The noble Lord, Lord Agnew, is no longer sitting on the Front Bench. It was the Government’s refusal to tackle another, largely unconnected corruption issue that led to his dramatic resignation. Our issue with corruption is clearly not contained to one sector, area or type. It is a pervasive UK issue.

As a nation, we are today like a guilty individual hastily pushing an illicit lover out of the window of their bedroom as the world’s media comes storming through the front door, this Bill being scanty garments hastily donned in ill order. The world, with its attention focused in particular down the road on the City of London, will clearly not be deceived about our state of disarray. According to the International Monetary Fund, as much as 5% of the world’s GDP is laundered money, and only 1% of it is ever spotted. Collectively, developing countries have lost $16.3 trillion to illicit leakages since 1980. A very significant chunk of that flows just down the road from here. The Thames is dwarfed by a far dirtier and deadlier stream of corruption, as the right reverend Prelate the Bishop of Leeds noted.

It is worth noting that we are here today because of President Putin. His actions forced our Government to react. We should not be reacting; we should have been proactive many years ago. As the right reverend Prelate said, we should not need this spur, yet clearly the Government are like a horse that has been baulking at the gate, not wanting to be pushed away from a lush, tasty pasture even when it has been made deadly ill by the colic of ill-gotten gains.

Colic is not a contagious disease, but our corruption is. Look at how Russia got to the state it is in today; back in the time of President Yeltsin, the guidance for reshaping the post-Soviet economy was largely handed to western lawyers, accountants and businesspeople. The Russians were told that the neoliberal market model was the way forward, and it actively encouraged what amounted to a 19th-century robber baron-dominated wild east, with what had been Soviet-era senior apparatchiks almost seamlessly switching to champions of the market. We still see some of them today, very close to home.

Of course, the oligarchs bear responsibility for their choices and actions, but so do those who encouraged and enabled them. The sicknesses of our society are many. We often talk about our productivity problem and our labour crisis, but what if the bankers, instead of serving the oligarchs, put their talents to optimising the outputs of our manufacturing? What if the accountants were tracking the movements of nutrients and micro-organisms, with the aim of producing good, healthy food? What if the lawyers were caring for our old and sick?

I am indebted to the noble Lord, Lord Sikka—I am very sorry that we will not hear from him shortly—for the figure that there are around 400,000 professionally qualified accountants in the UK. That is the highest per capita figure in the world. We have an economy that focuses on spreadsheets, not on the quality of our society. And what have we done in terms of delivering the rule of law? It is frequently claimed that we are at the centre of the camp defending it, but we have actually been leading its absolute undermining.

A book entitled Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals will be published tomorrow. It is definitely in the contest for the best-ever timed publication of a book. The author, Oliver Bullough, notes that we do not just need changes to legislation—we need changes to enforcement, as many noble Lords have noted, and to culture and politics.

In 2016, the Government estimated that the amount of corrupt money flowing into the UK had reached £100 billion a year, and Transparency International has identified at least £1 billion of suspect property bought with Russian money alone. But the flow is not just of money; of course, there has been a massive flow into the West of Russian oil and gas. The trashing of our planet and our economic and political systems are all intimately interlinked. The impoverishment of many and the destruction of our environment are linked to the benefit of the few.

I have some specific proposals and questions for the Minister. First, will the Government now reconsider their plan for freeports? Studies by the European Parliament and the Financial Action Task Force, among others, have shown that the secrecy and extraterritorial nature of freeports are a magnet for money laundering and tax evasion. These are the kind of things we are supposedly trying to act against.

Secondly, in terms of the Russian targets for these sanctions, we are talking about an opt-in system, identifying those oligarchs that are apparently close to Putin and his regime. Robert Reich, the former US Secretary of Labor and now a professor of public policy at the University of California, suggested the freezing of all offshore holdings of Russian nationals in excess of $10 million. He estimates that this would affect 10,000 to 20,000 Russians—those who, by definition, have benefited most from Putin’s rule. How about an opt-in system instead of an opt-out one?

Thirdly, due to the prod that led us to this Chamber today, we are of course focusing on Russia, but what about many other parts of the world? I think it was the noble Lord, Lord Carlile, who referred to the vicious actions of the Saudi state and our friends in the Middle East and arms customers. What are we going to do to address where Saudi money is in London and where it has come from?

I also stress to the Minister that the problem is not only people in the global south or in places that speak different languages or have different cultures from our own. There are also the tech billionaires and mining magnates, with their overweening wealth, tax dodging and exploitation of their workers. Illegally acquired wealth is far from our only problem. Unexplained wealth orders are meant to tackle that, but I suggest that we also need “all too well explained” wealth orders—you might call it a wealth tax. Many noble Lords have focused on the need to fund far better the enforcement of our laws; perhaps some of the money from a wealth tax could go towards that.

I have a final, practical question. The proposed registration will apply only to property bought in England in the last 20 years, or since 2014 in Scotland. Why not look at what is concealed by previous arrangements? Is it to be considered laundered clean, rather than just more dirty washing? Maybe there is not much desire to go further back. How much of the wealth of people in a place like this has deeply corrupt origins, stolen in the colonial and post-colonial periods?

The Greens can do nothing but support this Bill, which is a small step in the right direction. You can, however, sail even a modestly scaled superyacht through the gaps in it. I thank the Minister and his colleagues for a useful briefing that focuses on the need for a second Bill as soon as possible, but we need much more, and an acknowledgement that the problem is not simply the narrow legal framework, or individuals; the problem is our system.

20:16

[Lord Cromwell (CB)]

My Lords, although it does not say so on the Bill, it was perfectly clear before we even started, and has become manifestly clear throughout, that this Bill is largely about Russia. For that reason, I declare my interest as a director of the Britain-Russia Centre and British East-West Centre, an NGO set up in 1959 during the height of the Cold War. All noble Lords will agree that our disagreement is with the regime and particularly the man who leads it; it is not with the people of Russia, who suffer under that totalitarian system. We need to remember that, because many Russians are fed up with being referred to as “mafiosi” just because of their nationality.

As has been eloquently said by many, this Bill has been long awaited. It has been rapidly adapted in the light of current concerns about Russia and Ukraine, so it inevitably has gaps and shortcomings. We are told that ECB 1, if I may call it that, is going to be followed soon by ECB 2. I hope so, and that, in winding up, the Minister will assure us that the issues addressed today and by the NGOs, and the wider set of issues that have been identified, will be picked up in ECB 2 rather than it having a narrow focus.

I would like to spend what remains of my time—so many good points have already been made that I am skipping through my remarks—on the theme that compliance begins at home. The right reverend Prelate made a point about ethics; if he will forgive me for saying so, the only way is ethics.

Enablers such as law firms, accountancy firms and, if we are in a confessional mood, banks—I am a former banker—working with international clients whose source of wealth is opaque, have many questions to answer. The temptation of substantial new fee-earning opportunities has led some firms to take an accommodating, light-touch approach to anti-money laundering regulations—just within the letter of the rules, although sometimes not even that, and largely on a self-regulating, self-reporting basis: what we might call “marking your own homework”. Some enablers, as part of their onboarding process, actually coach clients in how to answer. They are tactical in what they ask—and do not ask—of clients, or accept pretty modest levels of proof, or even provide clients with services to mask their wealth and ownerships, or distance themselves from a rather disreputable hinterland.

I had hoped that the unexplained wealth orders that feature in the Bill would address this, and perhaps interim freezing orders, which do not seem to have been touched on tonight, might address some of the issues about the short notice required. But they appear to be directly almost exclusively at PEPs, politically exposed people, and those involved in serious and organised crime, which is not really defined in the Bill. I am not sure what “unserious and disorganised” crime would look like.

In asking Ministers about this narrow scope, I was told that existing anti-money laundering requirements on lawyers, banks and so on already require them to determine a client’s source of wealth and that they cannot take on clients who do not meet those requirements. “There’s no such word as can’t” is a weary old adage for anyone like me who had an old-fashioned upbringing. There are firms that can—and some of them do. Working in a private bank, it used to baffle me how we never took on Russian clients because it was just impossible to get them through all the tests, and yet I knew people who worked in other banks that were eagerly taking them on. I could not understand how they were doing it, but I think I know now.

For the past 25 years, I have worked with countries across the former Soviet Union, particularly Russia. Subsequently, for a period of about nine years, I worked in the private banking world, which bears out some of the points I have just made. For some, an occasional fine is just the cost of doing business. I do not know the full details but I noticed that, on Monday, the FT reported that an ex-partner of a leading firm was fined a mere £17,500 for lack of adequate due diligence in Russian transactions. That is a derisory amount.

The Bill needs to be strengthened in this area in two ways. First—this was touched on by the noble Lord, Lord Vaux—we want a named, senior-level sign-off by an enabler firm’s management to confirm that all wealth has been properly explained and evidenced, in compliance with the regulations. Given the existing rules, that may sound like belt and braces to some, but my goodness, that simple addition is needed. There is nothing like having a senior person sign off and remain on the hook. Could this perhaps be introduced as a modest but vital amendment to either this Bill or its successor, which, we are told, is imminent?

Secondly—this has been touched on by other noble Lords—with responsibility must come transparency. I am in no doubt that, unless there is properly resourced enforcement, abuse, rule-bending and blind eye-turning will continue. The National Crime Agency and others are almost on their knees from being understaffed; they are struggling and underresourced, as many noble Lords have said. Resourcing was also raised via amendments in the other place; I hope that this issue will be taken up by the Government to ensure that compliance is not only said to be done but regularly, independently and forensically checked. I would be grateful for the Minister’s commitment to that in winding up.

Finally, I want to touch on one aspect of the enablers’ work that has become a stain on the reputation of the UK. Many noble Lords have touched on this, notably the noble Lord, Lord Thomas—I look forward to supporting his Private Member’s Bill if we get the chance. Some call it strategic litigation against public participation. If you have a lisp, as I do, that is extremely difficult to say. I prefer to call it what it is: lawfare. It is the deliberate use of UK legal firms to intimidate and overwhelm authors, publishers, journalists and others who seek to bring into the light matters of public interest concerning the origins of unexplained wealth. Everyone has the right to defend their reputation robustly but what we have here goes way beyond that.

Examples abound but let me cite just one tactic. No matter how hard they have sought to engage with the parties they are reporting on, a journalist finds both themselves and their publisher receiving, at the last moment before publication, voluminous—there is sometimes truckloads of it—complex and menacing correspondence from heavy-hitting law firms threating ruinous legal action. Being on the receiving end is not only extremely intimidating; it also requires delay and specialist work that few can afford. It is indeed a brave journalist or publisher who, faced with this inequality of arms, still proceeds. Many, of course, do not. I also highlight—I do not think that we have touched on this tonight—that there are cases where human rights defenders, for example, working in other countries have, as a means of intimidating them, been sued or threatened with being sued in the UK courts.

UK firms have been systematically involved in these practices for far too long. I understand that there is a consultation going on; Dominic Raab’s work was mentioned earlier and I look forward to seeing the results. There are lessons that I believe we could learn, for example, from Australia’s model litigant principles in this area, which I will not elucidate now.

In closing, I ask the Minister: is he able to confirm, or at least offer some guidance on, whether the Government recognise the problem that I have highlighted, which arises directly from UK firms taking on wealthy clients of the sort that this Bill seeks to address? Will the Government, in ECB 2, include appropriate curative measures?

20:25

[Lord Clement-Jones (LD)]

My Lords, I draw attention to my entry in the register of interests. This is important and welcome legislation, which rightly we want to see pass through the House as a matter of urgency. But it must have teeth. As someone who, I confess, until recently held a solicitor’s practising certificate for 45 years, I say that it is toothless in a major respect, which has been touched on all around the House today. Whether under the beneficial owner register requirement, the unexplained wealth orders or the sanctions regime, there is a lack of provisions which comprehensively tackle enablers—the professionals used by those seeking to evade the impact of these provisions. A number of noble Lords, starting with the noble Baroness, Lady Chapman, have raised this.

As Edward Lucas put it in the Times last week:

“Putin’s ‘enablers’ live and work among us. They include bankers, lawyers, accountants, fixers and political bigwigs. Seemingly the epitome of respectability, for three decades they have prospered mightily, laundering Kremlin cronies’ fortunes and reputations.”


We have heard from my noble friend Lord Thomas of Gresford how they try to gag brave journalists, such as Catherine Belton, the author of Putin’s People, through what are called strategic lawsuits against public participation, also mentioned by the noble Lord, Lord Cromwell. But it goes much further than that. These professional advisers provide nominee and shell companies to hide disclosure of beneficial ownership of property and other assets; help to shelter unexplained wealth and freezing orders; and evade other tax, money laundering and economic crime legislation. They intimidate regulators with a mounting burden of costs if they are challenged.

As the OECD report Ending the Shell Game: Cracking Down on the Professionals who Enable Tax and White Collar Crimes, published last year, puts it:

“Over the last decades, the world has witnessed increasingly sophisticated financial crimes being perpetrated across borders—and the public interest in addressing such issues has also grown, as has been evidenced in the media through widely publicised leaks such as the Panama and Paradise Papers … These crimes are often facilitated by lawyers, accountants, financial institutions and other professionals who help engineer the legal and financial structures seen in complex tax evasion and financial crimes. The small segment of professionals that generate opportunities to facilitate the commission and/ or concealment of such crimes undermine not only the rule of law, but their own profession, public confidence in the legal and financial system, as well as the level playing field between compliant and non-compliant taxpayers.”


The report makes a very clear call to OECD countries to adopt strategies to address these issues in relation to professional enablers. But I see very little sign that such a strategy is being adopted by our Government. Last December’s Chatham House paper, The UK’s Kleptocracy Problem, makes very similar points. Where are the legal sanctions for professional enablers? Where are the measures to prevent abuse? Where are the mandatory disclosure rules? Where are the penalties for false statements? Where is the necessary whole-of-government approach that is recommended in this respect? The Prime Minister seems to think that regulation by the Solicitors Regulation Authority is a sufficient deterrent.

What is in the Bill as regards legal costs is fairly feeble too. We should be limiting costs payable by law enforcement bodies and regulators acting in the public interest in all civil cases under the Proceeds of Crime Act, as with criminal proceedings. These can represent a severe detriment to enforcement action, and I am very grateful to Spotlight on Corruption for pointing out, for instance, that the costs order against the NCA was in the region of £1.5 million in the case of the Aliyev unexplained wealth order—that is £1.5 million out of the total annual anti-corruption budget of £4 million. It is totally unacceptable. The courts should, of course, still be able to award costs against a law enforcement body or regulator where it has acted unreasonably in bringing or defending proceedings and the interests of justice or fairness would be offended, so there will still be some protection.

I will be tabling amendments in Committee which I hope noble Lords will support. We must tighten the net around these enablers. If not now, when?

20:30

[Viscount Waverley (CB)]

My Lords, as a brief declaration I remind noble Lords that I introduced a debate on relations with Russia in January 2018, then Salisbury occurred. Shortly thereafter, I introduced a debate on relations with Ukraine. In the same spirit, I also state that in 1997, I travelled in a delegation made up of Europeans to explore mechanisms to have Ukraine admitted to the European Union. I regret that that initiative did not advance.

I welcome the Bill. However, while the catalyst for it has been the war in Ukraine, it is a much-needed staged process, having been on the drawing board since 2018, to usher in overdue fiscal discipline to the United Kingdom. Once again, it is an illustration of the type of principled country we should be.

Put into context, the Bill has three elements—tactical, strategic and political—which should be considered. First, I shall deal with the tactical. The current draft leaves the door open to companies that hold UK property claiming they have no beneficial owner. This is already a common problem with the company register. The number of companies registered using overseas addresses that have been dormant since conception surprises me. It was explained to me that overseas people can have an accountant register a company and open a bank account; once established, there is an exchange of shares to the actual and final beneficiary. Alternatively, the horses have bolted, and I am told that moveable assets have already taken flight to such destinations as Hong Kong or Nauru in the Pacific.

Some 1,892 property titles were purchased by overseas companies before January 1999. These would be exempt from having to declare their owners under the current drafting. I favour research being done retrospectively, asking questions where concerns arise. There are concerns that the legislation will allow individuals to hide ownership of companies through nominee agreements with professional services firms. Such agreements could allow the true owners to claim that the offshore companies are controlled by, for example, a nominated law firm which is named on the register, rather than the true owner.

The Chartered Institute of Taxation, which sent a note to a number of your Lordships, raised a central point, however: it believes there is a lack of clarity over what the Government are trying to achieve. The Government might want to respond specifically to that point. If the Government’s aim is, as suggested in some government statements, revealing the real identity of foreigners who own UK properties, the institute does not believe the Bill will achieve this. This is because the legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather disclosure of the beneficial owner of the overseas entity which, in turn, owns the property. Its response is that if a separate nominee company is set up for the particular beneficial owner, then it thinks they would be caught. But if a non-UK law firm’s general nominee company is used and acts for hundreds of different clients, it will be difficult to see that any one of them exercises significant influence or control of the nominee company. So says the Chartered Institute of Taxation.

The combination of the imposition of fines for sanctions breaches and the expansion of the unexplained wealth order regime should be a central plank, however, as they will be effective in allowing the NCA and other prosecutors to disrupt criminal activity.

It is with some trepidation, in the presence of such fine judicial minds, that I venture to move on to my next point. Clause 49 amends Section 146 of the Policing and Crime Act 2017, introducing a strict liability offence for the breach of financial sanctions. Significantly, the individual or entity did not, therefore, have to know, or have reasonable cause to suspect, that they were breaching a financial sanction. A defence is to illustrate that appropriate policies are in place that illustrate compliance with the law, as is the case under the Bribery Act 2010.

Secondly, on the strategic element, the Bill probably shall not decisively weaken the Russian regime. It is wrong to believe that kleptocracy measures equate to a massive blow to the Russian leadership. The relationship of many oligarchs with the Putin power structure is often ambiguous. If anything, the proposed measures will be vocally lauded by much of the Russian public. The power structure of the regime is based on the siloviki, translated literally as “the powerful ones”, consisting of the intelligence apparatus, the higher echelons of the military structure and the deep-state bureaucracy at federal and local levels. They are the people who need to be followed: they are estimated to be around 1% of the population. These people—and it is they who will decide the future of a Putin presidency—are normally not allowed to travel abroad or own any assets overseas. They are the people the Government need to keep an eye on.

Other measures will affect Putin’s cost-benefit analysis on the war in Ukraine, with a notable measure being the announcement that Russia’s central bank would have its foreign reserves frozen. The banning of all transactions with the Russian central bank, with the United States establishing the list of specially designated nationals, which would prevent financial brokers and central security depositories dealing with it, will have considerable effect.

Thirdly, on the political element, while this Bill is introduced in the context of Russia’s attack on Ukraine, it is important to note that its impact will not be limited to Russian entities or persons but will affect all non-UK entities and individuals in Britain. The purpose of this Bill is not to disrupt legal arrangements in our haste to target certain Russians.

Any law is only as effective as its enforcement. The provisions in the new Bill will make little difference unless authorities are provided with additional resource to enforce them. The UK already has strong tools to target illicit funds, but law enforcement agencies have struggled to make full use of them because of resourcing issues.

The Bill will place additional administrative burdens on Companies House and the Land Registry. Will the Government confirm today that funding for the enforcement of new powers—including the enforcement of the register of overseas entities and the sanctions proposed in the Bill—will be put in place?

In conclusion, and more generally, I will focus on what has brought us together this evening. Consequences for sanctions are a small price to pay for the blockades, the bombing of population centres, the targeting of hospitals, the abuse and mining of humanitarian corridors, the destruction of essential infrastructure and food supply disruption.

The situation is sickening, and those responsible must be held to account. The building blocks and justifiable slow drumbeat of a European war, defending our values and Ukraine, are possibly just on the horizon. President Zelensky’s call to arms to Parliament may be a precursor to Britain’s accepting engagement. Ukraine’s war is our war.

20:40

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I am going to say something that I do not think I have ever said before: I have really enjoyed this debate. Virtually every noble Lord who has spoken has said, “I support this Bill but …”—and then has proceeded to give a list of reasons why it really is not a very good Bill. My noble friend Lady Bennett suggested that I was going to go into detail but, until this debate started, I thought I was going to follow the noble Lord, Lord Sikka, who has written an excellent 11-page briefing on the Bill, with three and a half pages that outline all the problems with it. I recommend that the Minister takes my copy afterwards and does something over the weekend to brush the Bill up a little.

The past two weeks have been very stressful, even being on the sidelines of watching a European war, and this seems to be the least we can do to actually fight part of that war for Ukraine. We all know that global capitalism is out of control—at least we really ought to know that by now. The mega-rich have been able to abuse their power and their wealth for far too long through investor visas, complex trusts and corporate structures, political donations—more of that in a moment—private schools, aggressive tax avoidance and legal tax loopholes. The mega-rich are actually able to pick and choose whether they obey the same rules and obligations as the rest of us have to do. It seems to me that we really need to get to grips with this. Governments all around the world allow them to get away with it. Worse, they lay out the red carpet and cut the red tape to try to attract them. We are told that cracking down on such people will just create unintended consequences and force them to flee to other countries. Well, we can hope.

These problems have been obvious for a long time, and this Government have ignored them for their 12 years in office. While I also welcome measures in the Bill and accept that it is urgent—because of course it has been urgent for quite a number of years—the Government have to face the shameful fact that they have dithered and delayed, until they have been forced to act by an illegal war. When a hard-line version of Brexit was pushed through Parliament in 2020—and I voted for Brexit; I did not realise that any Government could mess it up to this extent—we had 14 Ministers in Boris Johnson’s Government who had received donations from individuals or companies linked to Russia. Is that the reason why this economic crime Bill is so late and the measures in it so limited? Do the £3.5 million in Russian donations in the decade following 2010 explain why we have ignored Russian interference in our politics, why our intelligence services were not allowed to dig deep into the network of rich Russians and Conservative Party politicians, and why Parliament failed to push forward with the concerns brought to light by the Russia report?

I asked, I think last week—time goes so strangely here—what Russian donors to the Conservative Party get for their money. This is a question that the whole country would like to know the answer to. Is that money stopping the Government putting sanctions on large numbers of rich people who are close to Putin? Do the donations explain why we have fewer sanctions on Russia than the EU, Canada or even Switzerland? There are only just over 300 UK sanctions against Russia, 35 of which have been introduced since 22 February; and, before that, so few. By comparison, the US has sanctioned almost 1,200 individuals and companies, and a fifth of those sanctions have been introduced in the past two weeks.

So London is still a playground for oligarchs, oil barons and outright financial fraudsters—and, as has been said, it is not just Russians; there are unsavoury elites from almost every country on earth. This new legislation has to be used against all illegitimate, dubious members of the global elite, not used simply as a political tool against whoever we think our enemies are at that particular point. There has to be a constant tightening of the laws that constrain the mega-rich. The Government cannot be allowed to rest on this singular piece of legislation—or this double piece of legislation—and say, “We did it”. I regret that there is no sort of sunset clause so that we can look beyond this—the Bill definitely needs better writing.

The Bill can only be a starting point. The upcoming Queen’s Speech must include a raft of legislation to take these issues forward further and faster than many Tory voters or Back-Benchers might feel comfortable with. We really have to do more, and the Bill is only the start. The noble Lords who have explained this evening where we should be going really have to be listened to.

20:45

[Baroness O’Loan (CB)]

My Lords, it was a privilege yesterday to listen to the brave and compelling words of President Zelensky on the situation in Ukraine. We are at a pivotal moment in the history of this world and we stand again at an abyss. Brave people in Russia are trying to stand up against the invasion of Ukraine by their own leaders, but their efforts are being ruthlessly suppressed. We should pay tribute to those who go out on the streets of Russia to protest, knowing that there is no right of freedom of speech in that country and that their actions will inevitably attract sanctions.

President Zelensky asked that we do all we can to increase the sanctions against Russian kleptocrats and other criminals. The economic crime Bill is but one small measure that will allow that to happen; we must not escalate the conflict, but this measure should help a little. There is a widespread view that its effects need to be more immediate. I welcome the Bill, limited though it is, as so many noble Lords have observed.

I want to make one small point. Clause 48 creates a more robust power to impose monetary penalties by amending the Policing and Crime Act 2017 so that a person will be liable to sanction if a breach of a prohibited act or failure to comply with an obligation can be proved. Whether they had knowledge or reasonable cause to suspect that their actions were in breach of a sanction is irrelevant. If there has been a breach, fines, which can be very substantial, may follow. The clause enables greater flexibility in the decision-making process, permitting decisions to be made by other officials in the department rather than a Minister. It could be argued that the power in this section is so extensive that decisions should continue to have to be made by Ministers. At the very least, guidance should ensure that any official given such a power should be of an appropriately senior level.

Taken together, Clauses 48 and 46—the latter changes the costs regime following enforcement action—may give rise to questions about the Government’s assertion that the safeguards available in the legislation fully protect a person’s rights. There is an urgent need to prevent the kind of money-laundering activities to which the Bill is directed. Judges will have discretion as to the kind of costs orders that are made. It is important, though, that the procedures we adopt are capable of withstanding scrutiny and challenge.

Clause 46 amends the Proceeds of Crime Act 2002. Of course, that Act has many deficiencies, not least that the person subject to the inquiry and to the POCA proceedings sells the property identified, often at a price significantly lower than the normal market price. However, this is an amendment to the Proceeds of Crime Act relating to who bears the costs of proceedings, as other noble Lords have stated, associated with unexplained wealth orders, where a person who is not found guilty of any breach or any offence may have to pay very substantial costs, possibly greater than any fine, unless they can prove that the enforcement authority acted either unreasonably or, alternatively, dishonestly or improperly—whatever “improperly” may mean. Notwithstanding this, there are concerns that, given the complex and sensitive nature of such proceedings and the investigation that precedes them, it could prove profoundly difficult to meet this test of improper behaviour, dishonesty or unreasonableness.

I ask Her Majesty’s Government whether they can assure the House that these provisions fully protect a person’s rights not to find themselves with a very large costs bill resulting from an unfounded allegation or action, so that those with legitimate funds to invest in the UK will not be deterred from so doing. In saying this, I do not in any way detract from the condemnation of what is happening in Ukraine at present.

20:50

[Lord Empey (UUP)]

My Lords, there have been many excellent speeches this evening from people who have pointed out deficiencies in the legislation. I sincerely hope that the Government, over the weekend and before Committee, will listen to what has been said and make running repairs as required. If ever there was a case of closing the stable door after the horse has bolted, this is it. We have known for years what people were up to in this city and this country, and we have turned a blind eye. Now, it has come back to haunt us. I must point out to colleagues that the warning signs have been there. We know that this legislation, however belated, is fundamentally the right way to go, and I support the principle of it. However, I sincerely hope that the valid points which have been made in some excellent speeches will be listened to and acted upon as we move towards the conclusion of the Bill’s legislative stages.

I was privileged to serve on your Lordships’ Select Committee that undertook post-legislative scrutiny of the Bribery Act, under the chairmanship of the noble and learned Lord, Lord Saville of Newdigate. We were looking at how the legislation had been operating over a five-year period. In some respects, we probably should have looked at it at a slightly later stage. However, one thing which stood out from our committee’s inquiry—and which is again before us tonight—is the total inadequacy of the enforcement resource involved and required. We were looking at bribery in the context of ordinary commercial activities. We were not looking at it in terms of something very specific, as we are tonight. At that stage, we had representatives come before the committee pointing out that they just did not have the resources. We all know that if you are going to carry out an inquiry—whether it involves the police, the National Crime Agency or another organisation—it takes time. But we are giving half a year for people to go and do what they do best. I do not believe for one minute that, if they ring up or knock on the door of some of the professional houses in this city, they will be turned away for advice or help. They will get the best that money can buy. I sincerely ask the Government to look very closely at that.

In her opening remarks, the Minister referred to legislative consent motions from the devolved jurisdictions. I understand that the timescale was such that this has not been possible. However, can the Minister assure the House that we will not be leaving any back doors open as this legislation proceeds, so that part of our country could be used in a roundabout way to thwart its purposes? I hope that we can have an assurance to that effect.

The Minister will also be wearing his other hat, as Energy Minister. The war has been possible because it has been funded by the sale of fossil fuels by Russia, which accounts for some 65% to 70% of its economy. Unfortunately and understandably, we had COP 26 and a general view in this country and around the world that we must move away from our dependency on fossil fuels. As a former Energy Minister, I fully understand and accept that. However, we have not advanced to the point where we can survive in this country without almost 100% fossil fuel back-up, because wind is not dependable in all circumstances and we have not sufficiently developed wave and tidal power. These are 10 to 15 years away.

I understand that, being a relatively small country geographically speaking, things like fracking and the development of resources on land and in our own North Sea are controversial. But the fact remains that next week, we are going to pump concrete into wells in the north-west of England, which means that it will no longer be possible to extract gas from them. At the same time, we are leaving ourselves and our European partners very dependent on gas. There have been some disastrous decisions, particularly in Germany regarding the development of its energy policies. I ask the Minister to address that issue, because although it is not quite within the remit of the Bill, it is fundamental. Where are we going to get our resources from? They are not going to appear out of nowhere.

I support the fundamental principle of the Bill, but please can we have some clarity—if not tonight then as we move through the remaining stages—on what plan is in place to ensure that the bodies being given a role under this legislation will have the resources to investigate and enforce? Those are roles that bodies such as Companies House do not have. Where are the people who will be doing this work going to come from? Who, on the Monday morning after the Bill is passed, is going to open the file and start an inquiry? Where are they? That is very much the message that we in the post-legislative scrutiny committee got from looking at the Bribery Act: that the resources are not there to match our ambition. I hope the Minister can reassure the House when he winds up.

20:58

[Lord Macdonald of River Glaven (CB)]

My Lords, the noble Lord, Lord Carlile of Berriew, mentioned Alexander Litvinenko, and I should like to do so too. I was serving as Director of Public Prosecutions when he was murdered in London, dying of radiation poisoning in University College Hospital, a stone’s throw from here. Those of us charged with investigating and assessing this crime were left in no doubt at all that there had been Russian state involvement in its conception, planning and commission, most likely at the very highest levels. We believe that this was a state execution, carried out in the most public way possible, on the streets of our capital city, of a man under the protection of the British state.

I recall having a conversation at the time with the head of my counterterrorism division, in which we agreed that from this moment, everything had changed. If the Russian dictator was prepared to do this, where in future would the line be drawn? Perhaps we felt, “nowhere”. Nothing that has happened since then—Syria, Salisbury and a multitude of other provocations and crimes—has changed that view. In a real sense we may conclude that the invasion of Ukraine was inevitable; it was an outcome hiding in plain sight, and one which we, frankly, did too little to anticipate or prevent. Clearly, though, this also a watershed and time for us to reassess the way we have responded—or failed to respond—over the years to Putin, to his enablers and to their Russian money.

I support the Bill so far as it goes but I believe that it must presage a much broader and deeper rebalancing and retooling of our defences against the violence of the Russian regime and the financial corruption it brings in its wake. That corruption, in the form of looted funds, has found a home in London. We all know that. We all know that London has been the playground and piggy bank of choice for oligarchs, including those who owe their wealth to Putin and give him their public fealty. Beyond them, of course, are those who are less connected to the dictator but who, for the sake of their riches, agree not to challenge him and pay court at the Kremlin in a more surreptitious but equally shameful form of support.

It seems that we all now agree that the unfettered ability of these people to conceal their property and wealth in the United Kingdom beyond any sensible scrutiny is contrary to our national interest—good. Particularly welcome in this Bill, therefore, are the provisions in Part 1 around the transparency of property ownership. They are long overdue and urgent but we cannot delay. Six months is too long; it would defeat the very purpose of the Bill. Transparency of ownership is the most basic anti-corruption tool, and the Government have resisted it for far too long. It is beyond time for us to discover which parts of our cities and countryside these people own but we will not discover anything unless we move quickly and—as the noble Lord, Lord Eatwell, said—unless verification is effective.

Let me turn to the question of lawyers, which has occasioned much comment, including in the other place. I start by confessing that, as a criminal lawyer, I have represented many men and women over the years whom I would not invite home for tea. However, in matters of litigation, it is equality of arms that is the real problem. Oligarchs are rich; they can afford the very best advice. The risk is that, in doing so, they can out-gun enforcement bodies, not because their cases have merit but because they are rich. This is not necessarily to criticise their lawyers; it is to criticise the system for having no solution to this conundrum.

Having run the main prosecuting authority for five years, I know how pressing this problem can be. A single case lost against the richest of opponents can take a huge chunk out of your budget in costs orders. This has been a critical issue in the area of unexplained wealth orders. Frankly, it has helped to hobble them. Going for one is simply too financially risky: if you lose it, it costs you a small fortune. That is one reason why there have been so few, but it is not the only reason. I absolutely promise the Minister that, without properly funded enforcement agencies, we will make no progress—costs orders or no costs orders. This reform is toothless on its own. The NCA needs to be funded to conduct this work. It needs to employ the right people and it needs to have confidence that the Government will back it in doing so by putting their money where their mouth is.

Finally, let me deal with the question of our adoption of sanctions measures imposed by allied states with due process-compliant justice systems, dealt with in Part 3 of the Bill. I have heard many civil liberties lawyers complain about this proposed provision but I have no difficulty with it at all. We are talking, in essence, about the Five Eyes countries: the United States, Canada, Australia, New Zealand and the European Union. These are democratic societies and long-standing allies of the United Kingdom—our very closest allies—and each is demonstrably attached to the rule of law. In a moment of exceptional international crisis in which we all stand together, this is a proportionate—indeed, laudable—proposal.

From Alexander Litvinenko to Salisbury, the shelling of Kharkiv and the destruction today of a children’s hospital, the Putin regime has proved itself to be utterly contemptuous of the law. In the face of this, we must use ours more intelligently. I am glad that the Government have brought forward this Bill—it has my support—but Ministers should be under no illusions: there is much more left to do.

21:04

[Lord Fox (LD)]

My Lords, it is a pleasure to follow the noble Lord, Lord Macdonald. I think it is the first time I have ever had to do so; it is quite a daunting prospect having heard such an important speech. We on these Benches welcome the belated realisation by this Government that the City of London and other parts of the economy in this country need to be cleaned up. Just as the noble Baroness, Lady Williams, asked, we certainly aim to support this Bill practically.

This has been a strong debate. Some of your Lordships—the noble Lords, Lord Faulks and Lord Rooker, and the noble Viscount, Lord Waverley, to name but three—have, with justification, been able to say that this issue has been on their agendas for some time. Others, such as the right reverend Prelate the Bishop of Leeds, have highlighted the purpose of and focus on ethics that we should also dwell on. There was a sense of frustration in all the speeches that it has taken the terrible events in Ukraine—the onslaught on civilians—to cause this Government finally to act. They are acting, and we should take advantage of that, but it is awful that it has taken that to get to this point.

In welcoming this Bill, we are not blind to its shortcomings. Your Lordships have been wise to set out whole areas of action that need to be resolved before we can start the process of cleaning out the dirty money in the United Kingdom’s economy. I will not seek to paraphrase everything that was said but we heard about SLAPPs and the use of lawfare from the noble Lords, Lord Thomas and Lord Cromwell, and the noble Viscount, Lord Colville. We heard about company shells from the noble and learned Lord, Lord Garnier, and about trusts, freeports and whistleblowers from my noble friend Lady Kramer. The need to be more deeply retrospective was introduced by the noble Viscount, Lord Waverley, and the noble Baroness, Lady Bennett, as well as the issue of speeding up disclosure from Crown dependencies and overseas territories. Those are just some of the issues put by your Lordships before this House.

Virtually none of those substantive issues appear in Part 1 of this Bill. It seems that most of them might turn up in Part 2 but we heard the curriculum that the noble Baroness, Lady Williams, is putting forward for that part: limited partnerships, crypto assets, money laundering and Companies House. To digress on Companies House, the noble Lord, Lord Eatwell, very much paraphrased the issue: this is not just about resources. The cultural change required to make that organisation in any sense capable of doing any of the things that this legislation asks of it is huge. By the way, it is not just Russians; if Companies House had been doing what it should have, literally billions of pounds would not have been defrauded from taxpayers during the Covid crisis. A small fraction of that money could have been used as seed to produce a Companies House that is fit for purpose. Now we have lost that money but we still need to do the job.

Coming back to the Bill, all the issues that have been set out need to be tackled in its second part. I am looking for the Minister to acknowledge that, although the four issues set out by his colleague, the noble Baroness, Lady Williams, are important, a number of really important issues need to be added to that list. If it becomes an even bigger and more complicated Bill, I guarantee that those on these Benches will work hard to make sure that we can get that legislation through as quickly as possible. As the noble Lord, Lord Vaux, and the noble and learned Lord, Lord Garnier, said, we also need a process that reviews how Part 1 is getting along because it is clear that the speed with which this legislation is being implemented—and, indeed, the fact that it was written for one purpose and is being delivered for another—will inevitably mean that there are things not right with it.

We will work to help ensure that when the final Act—this part of the process—emerges, the Government will get the tools they say they need. When they get those tools, there will be no excuses for not following up on the people we have heard described to your Lordships this afternoon. As we have also heard, to do that will take well-resourced, highly qualified and motivated people to investigate and prosecute. The noble Lords, Lord Macdonald, Lord Carlile and Lord Empey, to name but three, set out the issue here. Unless the agencies tasked with cleaning up the kleptocrats have the resources and the support, the Bill does not amount to a hill of beans.

To date, this is an area the Government have been defunding. For example, the National Crime Agency—the principal body leading this fight, as we have heard—has seen its overall budget fall in real terms. The last inspection by Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services in July 2021 pulled no punches and highlighted how resource limited the NCA is. Further, the inspection also noted the difficulty in recruiting staff for investigating roles. There are remuneration and status issues around why that is not happening. It gets worse: within the NCA, the body specially configured to investigate kleptocrats is the international corruption unit. As we know, the ICU’s role is to investigate money laundering resulting from corruption by high-ranking overseas officials, bribery involving UK-based companies or nationals that has an international element, and cross-border bribery where there is a link to the UK. I am afraid the ICU seems to have fared even worse. Can the Minister confirm that it has had its budget slashed by 13.5% this year?

Meanwhile, over the past couple of weeks the Government have said they will set up a new kleptocracy cell within the NCA to target sanctions evasion and corrupt Russian assets hidden in the UK. The press release said that oligarchs in London will have “nowhere to hide”—there is a joke in there, but I decided not to use it. How exactly will the new NCA kleptocracy unit mesh with the existing ICU? For that matter, how will the kleptocracy unit relate to the complex web of underfunded joint committees and task forces that litter this area of investigation? The agencies we have are underfunded and there is a confusing web of different organisations and crossing accountabilities. Together, this adds up to the enforcement agencies being massively outgunned by the oligarchs, as we see and have heard from your Lordships. Is it any wonder that so few unexplained wealth orders have been issued?

The Government do not have to wait for the passage of the Bill. They could say now that they are going to reverse their defunding of the international corruption unit and announce now a funding boost for the NCA. We do not need a new unit or a new invention. We need the organisations that we have to be properly funded, targeted and supported to deliver the outcomes that I think your Lordships all hope for.

Next Monday we will have the opportunity to address the Bill before us in some detail. One thing is clear: the Government should embrace the issue of enablers more firmly. As we have heard, these are the lawyers, estate agents and accountants helping the kleptocrats. This theme, among others, was picked up in the Chatham House paper entitled The UK’s Kleptocracy Problem. It noted:

“Financial and professional services firms have long made the UK a comfortable home for dirty money.”


That is Chatham House, not some campaigning organisation that people might feel free to dismiss.

This Bill needs to explicitly target those professional services that knowingly create the comfort that has been enjoyed by Russian kleptocrats, and indeed by other thieves from around the world. They need to feel the heat. This is an issue that we will come back to on Monday, following up the excellent speech by my noble friend Lord Clement-Jones and the amendment that I know he has tabled.

Then there is the self-created loophole that was referred to by the right reverend Prelate the Bishop of Leeds: Clause 18. This allows all aspects of the register to be ignored if the Secretary of State decides that it is in the interests of national wealth to hide an oligarch’s assets. How big does the factory have to be for the theft to be ignored? How many jobs can a kleptocrat wash their soul with in this country? That is the nature of that clause—it hits right at the heart of what the right reverend Prelate had to say. It is, frankly, a continuation of what happens now; in other words, “The money is all right, so we won’t look at where it has come from.” My noble friend Lady Kramer was very strong on that issue. If we are to allow this line to continue in the Bill, it would essentially mean selling our moral soul in a different way—and it would put it into statute. We will have to address this issue when we get there.

There are issues that, following the debate in the Commons, we are looking forward to seeing how the Government will address. One is whistleblowers and another is freezing assets. We are looking forward to the Minister responding on that today or tabling some amendments before close of play tomorrow so that we can see where the Government are headed.

Finally, I know that the noble Lord, Lord Callanan, is an experienced Minister who knows how to read a room. If he is reading this Room, he knows that six months will not wash with your Lordships; that is very clear from almost every speaker, for lots of practical reasons. Money is already moving; the kleptocrats are cutting and running. To give them another six months’ head start essentially makes most of this pointless. I am sure that noble Lords on the adjacent Bench will be bringing forward an amendment, which we will certainly support when it comes before your Lordships’ House.

As the noble Lord, Lord Carlile, put it, in participating on this Bill in the way that we are—speeding it through Parliament—we are putting a lot of trust in the Government. We hope that trust is justified. We look forward to further constructive discussions on this Bill on Monday.

21:18

[Lord Coaker (Lab)]

My Lords, it is a pleasure to wind up for Her Majesty’s Opposition on this incredibly important debate and indeed to follow the noble Lord, Lord Fox, who made a powerful speech. I agreed with everything, really; there were other things that I might have highlighted, but I thought it was an excellent speech. It followed on from the many excellent speeches that we heard from across the House.

I start by setting the context because, as we debate this Bill in the Chamber, we are united in a common cause: to defend freedom and democracy and to stand shoulder to shoulder with Ukraine and its people against the illegal and immoral invasion by Russia of their territory. I highlight the speeches of the noble Lord, Lord Macdonald, and the noble Viscount, Lord Waverley, for pointing out and reminding us so powerfully of that. It really set the context for this debate and discussion today.

Many noble Lords have reminded us of this context, and indeed the Government themselves have said that the Bill is in part an urgent response to the Ukraine crisis. Our political outlooks may differ, but we all share a common belief about injustice, and there can be no bigger injustice than an unwanted invasion of a country’s sovereign territory. I remind us all of that, because it is why there is wide and general support across this House—and, I would say, within the country—for this economic crime Bill being rushed through in the way that it is. I say “rushed through” not as a criticism to the Government, but as something that it is important to do.

We as Her Majesty’s Opposition welcome it and, as we did in the other place, will support the Government in taking this through as quickly as we can. Although, as the right reverend Prelate the Bishop of Leeds, my noble friend Lord Rooker and the noble Lord, Lord Empey, and others have argued, should we not have acted before now? If money is dirty, then it is dirty. We must crack down; the UK’s role as a global centre for Russian money laundering has to stop. As the noble Viscount, Lord Colville, reminded us, Russian oligarchs secretly hiding money—as with all dirty money from anyone from anywhere—has to be stopped. There must be no hiding place or safe haven with hidden investments.

I say to the Minister that all the questions and challenges from me and other noble Lords are because we want the Bill to work. We want the sanctions to work and this economic crime Bill and the one that will follow it in due course to succeed. We all want the Government to succeed in this. It is not in any of our interests for the Government to fail or for these measures not to work. As the right reverend Prelate the Bishop of Leeds said, let this be the beginning of the new economic and monetary framework because it is ethically the right thing to do.

Turning specifically to some of the measures in the Bill on registration, these target those who exploit the UK property market by establishing a public register of beneficial ownership of overseas companies which own or want to buy real estate in the UK. Many noble Lords, including the noble Lords, Lord Macdonald, Lord Vaux, Lord Thomas of Gresford and Lord Faulks, the noble Baroness, Lady Kramer, the noble and learned Lord, Lord Garnier, pointed out the importance of this. We all welcome the reduction of the transitional period for certain overseas entities registering as such from 18 months to six months.

However, I do not think anybody who has spoken does not believe that six months is too long. As the noble Lord, Lord Fox, pointed out, we will table an amendment in Committee to further reduce that period. I think it was the noble and learned Lord, Lord Garnier, who pointed out that if you have six months to register it, it can be moved. I am not a genius in legalese and moving property, but if you have time to move the money we are trying to find out about, I suggest that many of these people—if they are bright and can pay for the advice, which they seriously can—will be able to do that. I say to the Minister that this is not out of anything other than that we do not believe six months will work in the way the Government want it to. I hope the Government will be able to listen to my remarks and those of noble Lords across this Chamber.

The noble Lord, Lord Carlile, and my noble friend Lord Eatwell pointed out Companies House. How will we ensure that it is fit for purpose? Companies House is essential to the functioning of the Bill. It is essential that Companies House works and is fit for purpose. In a brilliant speech, my noble friend Lord Eatwell—who brings an experience far beyond mine and that of, I suggest, many noble Lords—asked how the data will be verified. If the data is not verified as accurate, how can Companies House work effectively? Again, my noble friend Lord Eatwell is not bringing that forward to undermine the Bill or make a political point; he is bringing it forward as a man with all the experience in these areas that he has. He says to the Government that without the verification of the data, we cannot achieve. Without embarrassing the Minister, I think I am right in saying that my noble friend Lord Eatwell pointed to a book, or a preface to an article, that the Minister had written saying exactly the same thing. I hope the Minister can explain that and see how it will be done.

Unexplained wealth orders—again, measures to pursue and investigate unexplained wealth where property has been acquired with illegitimate cash—raise a question. We have had unexplained wealth orders; we all want to know what will make this version of them work this time, when the unexplained wealth orders that exist currently have not worked. Again, we all want them to work; but why will these work when others have not? The noble Lords, Lord Empey, Lord Carlile and Lord Macdonald, have again raised the issue of resources for the NCA to take the necessary action, as did the noble Viscount, Lord Waverley. If we are to have unexplained wealth orders, let them function in such a way that people who have unexplained wealth are fearful of the state taking action. At present, they do not fear it at all and do not expect anything to happen. We all want to see a solution to the issue of resourcing for the NCA.

The noble and learned Lord, Lord Garnier, in another powerful speech, noted that we must ensure that these measures are implemented sufficiently quickly to prevent people who have unexplained wealth shifting it before an order has been made affecting them. Again, that is an important point.

On sanctions, we have heard about the NCA, but the Government also talk about improving the Office of Financial Sanctions Implementation, giving it intelligence and information-sharing powers as stronger tools to carry out enforcement action. I had never heard of OFSI and had to look it up—it is in the Treasury—but these are people we will give stronger powers to. I have heard of the NCA, but what is happening with respect to giving these extra powers to OFSI?

As for sanctions, as the noble Baroness, Lady Bennett, and the noble Lord, Lord Hannay reminded us, how the Bill is enacted and enforced is essential, or else it is just warm legislative rhetoric. What we want to see is action. The noble Lord, Lord Clement-Jones reminded us that the Bill cannot be toothless. The Minister needs to reassure this Chamber that we have a Bill that will work and will carry sanctions with sufficient clout to take on the enablers and others.

As the noble Lord, Lord Fox, the right reverend Prelate the Bishop of Leeds, and the noble Baroness, Lady Kramer, mentioned, the Government need to explain the provision that someone will not be sanctioned if doing so is not in the economic interests of the country. The Bill as currently drafted appears to read as though there will be exemptions for occasions when it is not in the economic interests of the country for us to take action against a company or individual. Are we really saying that? Some clarification on that from the Minister will be welcome.

In his response, can the Minister explain and answer these comments made to him, and say who in government has ultimate responsibility for this legislation and its enforcement? Which Minister and which department will drive this forward? Will the resources to do it be made available? What further amendments are the Government considering and when will they be published? Will they be ready for Committee next week? What measures are the Government considering in their second economic crime Bill?

To conclude, we of course hope that this crackdown on Russian oligarchs and Russian dirty money will help undermine the regime and play its part in ending the war in Ukraine. The Bill allows us to take action against those who flaunt their wealth, predominately in London and the south-east, as the noble Lord, Lord Macdonald, reminded us. As the noble Lord, Lord Cromwell, said, however, it is those who are criminal whom we must act against, to stop them acting with impunity. Yes, the economic crime Bill is overdue, but it is a way we can act against Russia and those who support Putin now. Let us all hope that it plays its part in the defeat of Russia and the ending of the invasion of Ukraine, but also perhaps opens up the prospect of a more transparent financial system, not one so dominated by oligarchs with dirty money. We support the Bill and want it to work. It is in all our interests that it does.

21:29

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I start by thanking all noble Lords for their constructive engagement in advance of and during today’s debate, and for the support generally expressed for the swift passage of this Bill. The noble Baroness, Lady Jones, was right—she is occasionally—that this was a good debate with many insightful points. I would not go so far as to say that I enjoyed it but it was nevertheless a good debate. It has underlined the importance of taking action on the dirty money flowing through the UK, following Russia’s brutal and barbaric invasion of Ukraine. I totally agree with the noble Lord, Lord Coaker, that it is more important than ever to ensure that we have the powers we need to take swift action to tackle economic crime. In doing so, we should ensure that the UK remains the place for legitimate investment to flourish. I am confident that this legislation strikes the right balance.

I know that many noble Lords—the noble Lord, Lord Fox, in particular—have a strong interest in Companies House reform and limited partnership reform. So do I, as the Minister responsible for implementing these important policies. Let me assure the House that these measures will be included in a wider Bill in the coming months. They will come alongside new powers to make it easier to seize crypto assets from criminals and measures to provide businesses with more confidence to share information on suspected money laundering.

[Lord Eatwell (Lab)]

Will the Minister give way?

[Lord Callanan (Con)]

I may be about to address some of the noble Lord’s points about Companies House reform so let me finish this paragraph; if I do not address his points, I will come back to him, if that would be helpful.

I can say to the noble Lords, Lord Fox and Lord Coaker, and others that reform is already under way at Companies House. It has received £20 million for this financial year. A further £63 million was announced at the spending review. However, the full Economic Crime Bill will be very significant. I understand why noble Lords are questioning me about why it is not being included at this time; to be frank, it is purely a matter of drafting time. This will be the biggest change to our system of company registration in some 170 years—the biggest change to limited partnership law since 1907. Drafting has already begun and I can assure the House that we will bring it forward as soon as we possibly can in the next Session. I hope that what I have been able to say will provide some reassurance to the noble Lords, Lord Eatwell and Lord Coaker, the noble Baroness, Lady Jones, and the House as a whole.

[Lord Eatwell (Lab)]

Given the wide level of expertise evident in this debate, will the Minister commit to pre-legislative scrutiny of the new economic crime Bill? That would be the way both to exploit the talents available in this House and to ensure that the Bill, when it arrives on the Floor, will have a smooth passage.

[Lord Callanan (Con)]

Let me come back to the noble Lord on that. I certainly commit to full scrutiny of the Bill when it is ready, which I think the noble Baroness, Lady Chapman, also asked me about. It will not be emergency legislation; we expect it to have the full scrutiny of this House. I think that pre-legislative scrutiny would probably be a bit time-consuming; it is probably better just to bring the legislation forward, then it will get its full scrutiny. However, as I say, we are getting it drafted as quickly as possible. It is something like 150 pages of legislation so it will be substantial.

[Lord Fox (LD)]

About that: with many other Bills, the Government go out for consultation for six or eight months, redraft the Bill, then have two more White Papers. Then, sometime after three Christmases, we get the Bill. So, does “as quickly as possible” mean a few months or weeks? Are we looking at the latter half of the next Session, or are we looking at it being one of the first Bills to come out in the next Session?

[Lord Callanan (Con)]

I cannot win on this one: if I give too much time to pre-legislative scrutiny, for consultation et cetera, I will be criticised. I cannot give the noble Lord, a definitive time because, of course, it is not purely in my hands; it depends on parliamentary time, on the Whips, on the usual channels and on the availability of the House of Commons. It is certainly my intention to get it in front of noble Lords in a matter of months but I cannot be more specific than that. It will depend on when it gets drafted and when we can get parliamentary time. It is a firm commitment that we will bring it forward in the next Session—ideally towards the start of the next Session, if that helps the noble Lord.

I welcome the support from across the House, particularly from the Opposition Front-Benchers—I thank them very much. As I just said, I can reassure the noble Baroness, Lady Chapman, and the noble Lord, Lord Vaux, that the economic crime Bill will progress under normal procedures. I am sure there will be a full and detailed discussion about it. I will speak later to some of the points of the noble Baroness, and the noble Baroness, Lady Kramer. The noble Baroness, Lady Kramer, also raised the subject of the Crown dependencies. I can tell her that I spoke to the Crown dependency Ministers earlier today, just before I came in for this debate, and they are also fully on board with these measures, looking to help wherever they can and to progress similar measures in their own jurisdictions.

Moving on, many noble Lords, including my noble and learned friend Lord Garnier and the noble Lords, Lord Rooker and Lord Faulks, raised the legitimate question of why it has taken the Government so long to introduce the legislation. I can assure them it is not for the want of trying on my part; it is purely about the pressure on the legislative programme. They, as well as the right reverend Prelate the Bishop of Leeds, stressed the importance, and I totally agree, of stopping dirty money flowing from Russia and, indeed, other countries. This is not just about Russia. It benefits us in terms of Russia but, frankly, this reform is long overdue and it will also help us in the fight against money laundering from other jurisdictions. What matters is that, despite the long delay, we are now urgently bringing this legislation forward. We were planning to put this in the wider economic crime Bill but we decided to introduce these measures earlier, to put them into effect shortly. I am grateful for the support of the Opposition in doing that, and the wider economic crime Bill measures will follow in due course.

I take the opportunity to thank my noble friend Lord Faulks again, for all his work to develop the legislation and for some of the powerful points he made today. I reassure him that since we took the measure thorough pre-legislative scrutiny, we have been able to improve the legislation to reflect some of the pre-legislative scrutiny committees’ recommendations and to align it with the broader reform of Companies House, which I completely agree we need to do, to make the measure effective. I think the legislation as a whole will be more effective as a result of the scrutiny that has taken place. This has been central to ensuring the new requirements are workable and proportionate and that the register strikes the right balance between improving transparency and minimising burdens on legitimate economic and commercial activity.

I thank the noble Baroness, Lady Kramer, the noble Lords, Lord Hannay and Lord Vaux, and my noble and learned friend Lord Garnier for their points on the transition period. I think the noble Lords, Lord Coaker and Lord Fox, made similar points. Let me explain our logic on this. We have already reduced the transition period from 18 months to six months. I understand the importance that noble Lords attach to this, but it is important to remember that the majority of properties held via overseas entities will be owned by entirely law-abiding businesses and people. To give noble Lords an idea of the scale, we are talking about roughly 95,000 properties in England and Wales owned by some 32,000 overseas entities. It is a fact that only a tiny fraction of these are likely to be held by criminal or corrupt interests.

The transition period is an important protection for the rights of those legitimate owners of property and we have to be careful about interfering with individuals’ property rights, interference that could not reasonably have been expected when those rights over the properties within scope of the register were originally acquired. This legislation has considerable retrospective effects. We have to ensure that we are respecting those rights in a way that cannot be challenged—not least under human rights legislation. No doubt, those who wish to avoid these requirements and are able to afford expensive legal teams will take advantage of any opportunity to do so.

Many of the ultimate owners will be law-abiding British companies that have adopted these structures for legitimate commercial reasons. They could include real estate investment trusts, which are public companies whose core business is to manage and own properties that generate income, or particular pension schemes that hold land and properties. Others will be British nationals who have adopted the arrangements for legitimate reasons of privacy—a point made from the Cross Benches but I forget who made it. That may involve, for instance, celebrities who do not want their address to be known publicly.

As the noble Lord, Lord Fox, observed, I am aware of the strength of feeling expressed that corrupt people must not be allowed to sell up and escape the transparency that the register will bring. The Government see merit in requiring all those selling property to submit a declaration of their details at the point of transfer of land title during the transition period. This would mean that a zero-day transition period to provide certain information immediately would be given to anyone selling. They would have to register ownership if selling, and that way we either get their ownership details immediately or, if they do not sell, we get it at the end of the transition period but in a way that still protects legitimate owners. We are urgently looking at this idea and giving it some serious consideration, but we need to get the drafting right and legally watertight, so that it is workable, effective and achieves what we want to achieve. Officials are working on this at the moment and I hope to get the proposal to noble Lords for consideration before we reach Committee.

Although the register will not be operational immediately, we expect the measures to have an immediate dissuasive effect on those who are intending to buy UK property with illicit funds. I can assure the noble Lord, Lord Faulks, that work on implementing the new register will begin as soon as we have achieved Royal Assent, and we will look to have the new register in place as soon as practicably possible—as soon as this House is able to consider and pass the relevant statutory instruments, and when some of the other measures are put in place. I should also add in response to many of the comments that all conveyancers and estate agents are already required to assess transactions for money-laundering risks and to alert authorities about suspicious activity.

I turn to the question from the noble Baroness, Lady Bennett, on the retrospective application of the register. It will apply retrospectively, thereby compelling overseas entities to register if they have property bought since January 1999 in England and Wales and December 2014 in Scotland. Those dates have been selected because they relate to when jurisdiction of incorporation was originally required by Her Majesty’s Land Registry and the Registers of Scotland when registering title documents for land. This information has never been recorded by the Northern Ireland land registry, so we are unable to make any retrospection apply there.

As set out in the Bill, if a foreign company does not comply with the new obligations, every officer in default can face criminal sanctions, including fines of up to £2,500 per day or a prison sentence of up to five years. We have also included a power to make secondary legislation that can allow the registrar to impose financial penalties for non-compliance without the need for criminal prosecution. Critically, non-compliant overseas entities will face significant restrictions over dealing with their land. That is important because by their very nature, it might be difficult to impose criminal penalties on people who are overseas. But a restriction on them being able to deal with and dispose of their land will be particularly important because that will in effect prevent sales and render the property worthless.

I thank noble Lords and others who have made insightful and important points on the importance of robust supervision and the need to tackle the so-called professional enablers. Those noble Lords include the noble Baroness, Lady Bennett, the noble Lords, Lord Londesborough and Lord Cromwell, the noble Baroness, Lady Chapman, the noble Lords, Lord Faulks, Lord Carlile, Lord Thomas and Lord Rooker, and others.

The UK supervisory regime is comprehensive. The UK regulates and supervises all businesses most at risk of facilitating money laundering, including accountants, estate and letting agents, high-value dealers, trust or company service providers, the art market and so on. We strengthened the money laundering regulations in June 2017, thereby bringing UK legislation in line with the latest international standards. This includes requiring estate agents to carry out due diligence on both buyers and sellers of property.



To be very clear to the noble Viscount, Lord Waverley, any money obtained through corruption or criminality is not welcome in the United Kingdom, including that linked to Russia or other countries. That is why we are at the forefront of global action, spanning the operational, policy and diplomatic communities to target the money launderers and enablers who underpin corrupt elites and serious and organised crime.

[Baroness Kramer (LD)]

I am sorry to intervene, but perhaps the Minister could explain why, if there is such an effective system in place, we have a problem today. Surely there is a flaw.

[Lord Callanan (Con)]

This is what we are attempting to address in this legislation. We are trying to make the system as transparent as possible, to improve the action on unexplained wealth orders, et cetera.

[Lord Clement-Jones (LD)]

My Lords, the noble Lord has contradicted himself. He said that there was a robust system in place, but he has just talked about money laundering for enablers.

[Lord Callanan (Con)]

I said there was a robust system in place under the money laundering regulations in response to the various points that were made about financial services professionals, estate agents, et cetera. That is not to say that we cannot improve the system; we certainly look to do that. Providing information and transparency on property ownership, unexplained wealth orders and the sanctions regime, which is what we are doing, will help to supplement that system.

In July 2021, the CPS amended its legal guidance on money laundering offences for prosecutors to make it clear that it is possible to charge someone under Section 330 of POCA, which relates to the failure to disclose money laundering in the regulated sector. This closes a long-standing gap in law enforcement’s toolkit, which will better enable us to tackle the small minority of complicit professional enablers.

In addition, the Solicitors Regulation Authority—the largest legal PBS which supervises approximately 75% of regulated legal service providers in the UK—undertook a broad range of enforcement action in 2021. This included issuing 14 fines totalling £163,000, suspending membership three times and cancelling membership 13 times, effectively preventing an individual conducting regulated activity.

To take another example, the Institute of Chartered Accountants in England and Wales—the largest accountancy PBS—undertook a broad range of enforcement action. This included issuing 59 fines, totalling £178,000, and cancelling the membership of firms six times—again, effectively preventing an individual conducting regulated activity.

The noble Lord, Lord Carlile, suggested that we should consider how we can make legal professionals report matters relating to national security in a structured way and without the benefit of legal professional privilege. This is a complicated matter and not for this Bill, but I certainly welcome his contribution and his engagement, and we will certainly look at that.

The noble Baroness, Lady Kramer, raised an important point on protecting whistleblowers. We recognise how valuable it is that whistleblowers are prepared to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. The whistleblowing regime enables workers to seek redress if they are dismissed or suffer detriment because they have made a so-called protective disclosure about wrongdoing. It is right and proper that the Government review the whistleblowing framework once we have had sufficient time to build the necessary evidence of impact of the most recent reforms. We are considering the scope and timing of a review.

A number of noble Lords—the noble Lord, Lord Macdonald, in particular— raised an important point concerning the wording “knowingly and recklessly”. The wording is drafted on precedent, coming from the Companies Act. This clause is intended to provide a necessary and proportionate deterrent to those who may otherwise provide inaccurate or misleading information on the register of overseas entities. This was debated at length in the other place and the Government have already made a commitment to reconsider the drafting. I also welcome the comments of the noble Lord, Lord Macdonald, on the sanctions proposals.

The noble Baroness, Lady Kramer, and the noble and learned Lord, Lord Garnier, asked about the issue of the register and trusts. If the assets are owned via an overseas legal entity, then this entity is within the scope of the draft Bill and will be required to register the trustees as beneficial owners with Companies House and state the reason that they are the beneficial owner—that is, because they are the trustees of that trust.

Her Majesty’s Revenue and Customs introduced a register of trusts in 2017. Trustees of trusts that acquire UK land or property are required to register and provide information on the beneficial ownership of the trust. The information on the register can be shared with law enforcement authorities and enables them to access information on the trustees and beneficiaries of all trusts. Reforms to unexplained wealth orders will also allow law enforcement to investigate the origin of any property held via trusts.

I now turn to the points raised by the noble Lords, Lord Vaux and Lord Eatwell, on verification. Clause 16 requires the Secretary of State to make regulations requiring the verification of information before an overseas entity makes an application for registration, complies with the updating duty or makes an application to be removed from the live register. To ensure that regulations are laid in a timely way, we have added a requirement for regulations to be made before applications may be made for registration in the register of overseas entities. We expect that UK anti-money laundering supervised professionals may have a part to play in this, and we will set out details on the verification scheme in regulations. Overseas entities will be required to update their information annually, and Companies House will be given broad powers to query information it holds via the further legislation to come later in the year. Also, the very public nature of the register means that there will be many eyes viewing the data, which will of course aid in identifying any inaccuracies. I thank my noble and learned friend Lord Garnier for his comments on whether we are capturing the ultimate beneficiaries of property. This is an important point.

[Lord Vaux of Harrowden (CB)]

The Minister has not answered the question about why the register is updated annually, not 14 days after a transaction in the way that the PSC rules have to be updated.

[Lord Callanan (Con)]

I will come to that in a second. The new register is designed to allow investigators to get behind opaque companies. Whether a title is held by a company or an individual, the noble Lord is right that there may be a different beneficiary of the property. That is something investigators may explore further. The task of this register is to look through the company, and that is where we are focused in scope. The question of recording the ultimate beneficiaries of property is a far wider point and would apply to properties held by individuals and UK companies too.

I thank the noble Lord, Lord Carlile, for sharing his experiences with Companies House. We have outlined in the White Paper, published last week, what we are proposing to do under register reform. We are seeking to limit the risk of the misuse of companies by ensuring more reliably accurate information on the companies register, reinforced by identity verification of people who manage or control companies and other UK- registered entities. We will give greater powers to Companies House to query and to challenge the information it receives, and we will give enhanced protection of personal information provided to Companies House. There will be more effective investigation and enforcement and better cross-checking of data with other public and private sector bodies. Companies House will be able to proactively share information with law-enforcement bodies where they have evidence of anomalous filings or suspicious behaviours.

I move on to unexplained wealth orders. I thank the noble Baroness, Lady Chapman, the noble Lords, Lord Vaux and Lord Carlile, and my noble and learned friend Lord Garnier for the points that they raised on the use of UWOs. The threat of substantial legal costs has been a barrier to the use of UWOs. Likely subjects of UWOs are the most litigious persons. To ensure that unexplained wealth can be investigated in the maximum number of cases, we are reforming the cost rules to ensure that agencies will not be burdened with high legal costs if they act with integrity. If an agency acts dishonestly, unreasonably or improperly, it may still be ordered to pay the costs of those subject to a UWO, which is to ensure fairness. An important point to raise regards the changes to the cost rules to limit law-enforcement liability following an adverse court ruling. Protection from costs means that the court has discretion to award costs against an enforcement agency only if it acted dishonestly, unreasonably or improperly. This will remove a key barrier that has discouraged the use of UWOs, while of course providing a safeguard against arbitrary use of the powers.

The noble Lords, Lord Vaux and Lord Carlile, expressed concerns relating to resourcing for law enforcement agencies. The Government have developed a sustainable funding model that demonstrates our commitment to tackling economic crime. The combination of this year’s spending review settlement and private sector contributions through the levy will provide economic crime funding totalling around £400 million over the spending review period. That includes the £63 million that I mentioned earlier for Companies House reform. Since 2006-07 nearly £1.2 billion of the assets recovered under the Proceeds of Crime Act has been returned to law enforcement agencies, prosecutors and the courts to fund further asset-recovery capability or work that protects the public from harm.

Account freezing and forfeiture orders are a hugely impactful tool in the law enforcement toolkit. AFOs have proved their worth in a wide range of cases and are seen by law enforcement agencies as a quick and effective method of disrupting criminals and recovering their assets. In 2020-21 just under £219 million of the proceeds of crime were recovered within England, Wales and Northern Ireland. This continues the general trend of improved performance since 2016-17.

The noble Baroness, Lady Kramer, raised an important point on Clause 18 of the Bill and the exemptions for which it provides. The phrase used in the draft Registration of Overseas Entities Bill, published in 2018, was that the Secretary of State may exempt a person from the requirement to register only for “special reasons”. This was intended to mirror the wording used in the Companies Act 2006 in respect of the persons with significant control regime. However, the pre-legislative scrutiny committee that examined the draft Bill in 2019 was of the opinion that the reasons why an exemption could be granted should be explicit in the Bill. The Government accepted the committee’s concern that otherwise the power may be too wide, and we amended the Bill accordingly—I think that also addresses some of the points made by the noble Lord, Lord Carlile. The circumstances outlined in the Bill have been carefully considered to provide clarity but also flexibility for unforeseeable but legitimate scenarios. Given that the key objectives of this register are to improve transparency and combat money laundering, these exemptions will be used very carefully, and only for evidenced and legitimate reasons.

The noble Baronesses, Lady Bennett and Lady Kramer, raised the subject of freeports. Throughout the bidding prospectus and subsequent business-case processes, prospective freeports were required to set out how they would manage the risk of illicit activity. Those plans were scrutinised by officials in Border Force, HMRC, the National Crime Agency and others. The Government already require each freeport governance body to take reasonable efforts to verify the beneficial ownership of businesses operating within the freeport tax site and to make that information available to HMRC, law enforcement agencies and other relevant public bodies. Given the nature of the information, we do not think it would be appropriate for the freeport governance body to release that information publicly because it is a third party and does not have the locus to release such information about a business to the public. Furthermore, the requirement would also partially duplicate the people with significant control register at Companies House, where there is already an onus on the company itself to provide information.

I fear that I am running out of time—

[Viscount Waverley (CB)]

My Lords, I apologise. Would the Minister consider this as a subject for the upcoming Commonwealth Heads of Government Meeting in Kigali? Will he represent the Government in fully engaging with all Commonwealth countries, including the Overseas Territories, so as to encourage the English-speaking world to understand fully all these measures, because they should all engage with this, and we do after all share a common judicial system?

[Lord Callanan (Con)]

I am sure we will want to engage with all other parts of the world, not just the English-speaking world, through the Commonwealth Heads of Government Meeting. We will want to engage with as many countries as possible to see that this regime is extended.

I apologise; there were a number of other points made that I wanted to answer, but I have run out of time. However, I shall pick up one point made by the noble Lord, Lord Empey, about Northern Ireland. We are working with Northern Ireland Ministers on the devolved matters in the Bill. As he will be aware, due to the ongoing situation with the Northern Ireland Executive we are unable to formally seek a legislative consent Motion, but the noble Lord can be assured that we would not proceed without the support of Northern Ireland Ministers. I have had meetings with Ministers from Northern Ireland and from Scotland to discuss this matter.

I know I have not addressed some points, but I am sure we will examine them in Committee. I have already been speaking for 30 minutes, the hour is late and the Chief Whip is getting unsettled, so I will draw my remarks to a close. We have to respond to this illegal invasion and the Bill enables us to do so. We need to rid this country of dirty money, and I am greatly encouraged by the support given to us by all parts of the House. I apologise for taking a long time over my response, but I commend the Bill to the House.

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