Economic Crime and Corporate Transparency Bill

Committee stage
Tuesday 9th May 2023 Grand Committee

Committee (6th Day)

Amendment 91A

Moved by

[Lord Goldsmith of Richmond Park]

91A: After Clause 187, insert the following new Clause—
“Sanctions enforcement: monetary penalties
(1) In section 143 of the Policing and Crime Act 2017 (interpretation), in subsection (4) (meaning of “financial sanctions legislation”), in paragraph (f)—(a) the words from “contains” to the end become sub-paragraph (i);(b) at the end of that sub-paragraph insert—“;(ii) makes supplemental provision (within the meaning of section 1(6) of that Act) in connection with any prohibition or requirement mentioned in sub-paragraph (i).”(2) The Sanctions and Anti-Money Laundering Act 2018 is amended as follows.(3) In section 17 (enforcement), in subsection (9), in paragraph (a), after “(2)” insert “or makes supplemental provision in connection with any such prohibition or requirement”.(4) After section 17 insert—“17A Enforcement: monetary penalties(1) The provision that may be made by virtue of section 17(2) (enforcement of prohibitions or requirements) includes provision authorising a prescribed person to impose a monetary penalty on another person if satisfied, to the prescribed standard of proof, that the other person has breached a prohibition, or failed to comply with a requirement, that is imposed by or under regulations.(2) Regulations authorising the Treasury to impose a monetary penalty in respect of a breach or failure for which the Treasury could impose a monetary penalty under Part 8 of the Policing and Crime Act 2017 may not be made unless the regulations also make provision of the kind mentioned in section 17(9) to disapply Part 8 of that Act in respect of that breach or failure.(3) Regulations authorising the imposition of a monetary penalty may make provision that, in determining for the purposes of the regulations whether a person has breached a prohibition, or failed to comply with a requirement, any requirement relating to the person’s knowledge or intention is to be ignored. (4) Regulations authorising the imposition of a monetary penalty must provide that—(a) a person is not liable to such a penalty in respect of conduct amounting to an offence if—(i) proceedings have been brought against the person for that offence in respect of that conduct and the proceedings are ongoing, or(ii) the person has been convicted of that offence in respect of that conduct, and(b) no proceedings may be brought against a person in respect of conduct amounting to an offence if the person has been given such a penalty under the regulations in respect of that conduct.(5) Where regulations authorising the imposition of a monetary penalty authorise a prescribed person to determine the amount of the penalty, the regulations must provide for a maximum penalty.(6) The maximum penalty may be a prescribed sum of any amount or may be calculated in accordance with the regulations.(7) In this section—“conduct” means an act or omission;“regulations” mean regulations under section 1.””Member’s explanatory statement
This clause makes it clear that Treasury can impose monetary penalties under the Policing and Crime Act 2017 for breaches of provisions that are supplemental to financial sanctions and that regulations made under section 1 of SAMLA 2018 can include provision conferring power to impose monetary penalties.

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

My Lords, I rise to move Amendment 91A in the name of my noble friend Lord Sharpe of Epsom.

The Government take the enforcement of their sanctions regimes seriously. Ensuring that we have a firm basis for enforcement action is especially important given the unprecedented sanctions measures that we have implemented in response to Putin’s illegal invasion of Ukraine last year.

There are various methods to enforce UK sanctions, one of which is the imposition of civil monetary penalties, also known as CMPs, which are fines levied by the Government for breaches of sanctions. CMPs do not require a criminal prosecution and involve far less cost to the justice system than criminal prosecutions. To date, the Office of Financial Sanctions Implementation, which is known as OFSI and is part of His Majesty’s Treasury, has levied nine CMPs totalling more than £20 million since it was set up in 2016. The UK Government’s ability to impose CMPs is likely to factor in the calculations of those seeking to breach sanctions for financial gain.

This amendment is part of the Government’s work to strengthen enforcement across our UK sanctions regimes. The new clause will amend the Sanctions and Anti-Money Laundering Act 2018—SAMLA—to provide express provision in relation to the imposition of CMPs. New Section 17A of SAMLA clarifies and reinforces the broad enforcement powers contained in Section 17 of SAMLA, that:

“Regulations may make provision … for the enforcement of any prohibitions or requirements imposed by regulations”.


The amendment also strengthens the basis for CMPs to be imposed by the Treasury under the Policing and Crime Act 2017 for offences that are supplemental to financial sanctions. Again, this is a clarificatory amendment. While criminal and civil enforcement options are already in place, this measure provides clarity on the Treasury’s power to impose a CMP for such offences. The amendment also provides for the Policing and Crime Act 2017 to be disapplied where the Treasury has the power under both sanctions regulations and the Policing and Crime Act to impose CMPs in respect of prohibitions or requirements.

Of course, putting these powers on a firmer footing is worth while only if we invest the necessary resources to make use of them. In the recent Integrated Review Refresh, the Prime Minister announced a new £50 million economic deterrence initiative which will improve our sanctions implementation and enforcement. This will maximise the impact of our trade, transport and financial sanctions, including by cracking down on sanctions evasion. It will also be used to prepare the Government for future scenarios where the UK may need to deter or respond to hostile acts.

I hope that noble Lords will support this amendment. I beg to move.

[Lord Alton of Liverpool (CB)]

My Lords, there has been a change of Minister since we discussed this matter last week when we had a curtain-raiser on Amendment 85, which I moved in Grand Committee. It is always good to see the noble Lord, Lord Goldsmith, in his place; indeed, he had to answer the debate initiated in this Room last week by the right reverend Prelate the Bishop of St Albans. He also had to answer the question about how sanctions can be used to deter autocrats and flag British values against the values of authoritarian regimes; we discussed that issue at some length. As one would expect, the noble Lord gave a competent and welcome reply.

I notice, however, that the Minister’s noble friend Lord Johnson is sitting alongside him—

[Lord Fox (LD)]

No, he is not.

[Lord Alton of Liverpool (CB)]

Oh, is he not? I am sorry; I had better put my spectacles back on.

[Lord Coaker (Lab)]

Specsavers.

[Lord Alton of Liverpool (CB)]

I apologise to the noble Lord, Lord Evans. It seems that the noble Lord, Lord Johnson, is still travelling back from Hong Kong, but I can see that the noble Lord, Lord Sharpe of Epsom, is sitting in his place. He dealt with our debate last week; no one in this Committee knows more about Hong Kong than he does, having worked there. He will recall the discussions that we had not just on that occasion but on other occasions as well.

The matter was very much on my mind when reading the reports about the visit of the noble Lord, Lord Johnson. I wondered how the imprisonment of more than 1,000 legislators and lawmakers in Hong Kong has been dealt with during that visit, not least the position of Jimmy Lai, who is a British citizen. Indeed, in this very Room, sitting at the back of our proceedings just a couple of weeks ago was Sebastian Lai, his son. I know from our subsequent discussion that he felt deeply that not enough had been done by the United Kingdom in raising the case of his imprisoned father, who might well die in prison. I hope again as I press the Minister, as I did last week, that he will be able to tell us what the response has been from James Cleverly, the Foreign Secretary, and the Prime Minister, to the requests that have been made. Mr Sebastian Lai, who is also a British citizen, and his international legal team should have the opportunity to discuss his case, the role of assets and why no one in Hong Kong has been sanctioned, whereas British parliamentarians have been sanctioned. Despite the sanctioning of the former leader of the Conservative Party Sir Iain Duncan Smith and colleagues such as the noble Baroness, Lady Kennedy of The Shaws, we nevertheless continue business as usual by promoting closer and deeper business links, as the noble Lord, Lord Johnson, has been doing in Hong Kong. How does that link to the need for us to assess the assets that are held in this country by people who have been responsible for the incarceration of pro-democracy legislators and activists, more than 1,000 of whom are currently in jails in Hong Kong?

The main purpose of the amendment that I moved last week and of Amendment 91A before us today is to concentrate on the sanctions regime that has been imposed as a result of the war in Ukraine. I pay tribute to the Government for what they have tried to do, often in exacting circumstances, after the war erupted, but when I went to see the noble Lord, Lord Sharpe, and a member of his Bill team to discuss this last week, he was very straightforward in saying that there is nothing new in Amendment 91A and that it entrenches the current situation. It could be said to be sending a signal, but legislation is about more than semaphore and sending signals. Will the Minister say what is new in this amendment that is not already on the statute book?

Britain’s sanctions regime is broken, which is why some of the players who have been involved in the appalling events in Ukraine have been getting away with murder. Brave people have been laying down their lives defending not just their own country but our shared values of democracy and freedom. From the outset, we must recognise that our sanctions have always been held back by murky layers of financial secrecy in this country, which is why we need more than what is in Amendment 91A and why I hope that the noble Lord, Lord Sharp of Epsom, in particular, will continue to engage with those who spoke in favour of the amendment that I moved last week—they included the noble Lords, Lord Coaker and Lord Leigh, my noble friend Lord Fox and the noble Baroness, Lady Altmann. I therefore hope that Amendment 85 in its fullness, or something like it, will be put in place of Amendment 91A when the Bill comes back on Report.

It feels like every week we get a new story about this oligarch putting his wealth “in the hands of his young children” or that oligarch shrouding his UK assets behind so many shell companies and opaque trusts that we simply cannot track them down. I mentioned Roman Abramovich as a particularly high-profile example. The so-called oligarch files which were leaked earlier this year revealed how he was allegedly able rapidly to move at least $4 billion of his wealth away from law enforcement by transferring the beneficial ownership of several secretive trusts to his children just before he was slapped with sanctions by the Government.

We do not need to take a much closer look at the network of professional enablers who make this type of wrongdoing possible to see what is involved. There are accountants, lawyers and bankers who wilfully subvert our sanctions regime in exchange for tainted roubles. This is all absolutely legal. We have built a financial services sector in which people have been able to play an interminable game of cat and mouse with law enforcement, where the official owner of a given asset—if we can identify who that is in the first place—can change with little more than a stroke of the pen and no questions asked. Now we are finding that those same people—oligarchs, kleptocrats, call them what you will —know the rules of this game and its loopholes better than we do.

Accepting that our existing sanctions policy is not fit for purpose is important, but right now we can and should find a way to make sure that what sanctioned Russian assets we have managed to identify and freeze are taken away from these oligarchs and put towards Ukrainian reconstruction efforts. As it stands, if the war in Ukraine were to end tomorrow, we would have little choice but to hand back £18 billion of frozen assets to their dubious owners, with no questions asked. This is the distinction between freezing and seizing. We simply cannot allow that to happen. Ukrainian schools, hospitals and homes need to be rebuilt in their thousands and scores of unexploded bombs and mines need to be cleared to do so.

The question for us is whether this amendment goes anywhere at all towards achieving that. The cost of rebuilding the country could top £1 trillion, according to recent estimates. Ukraine’s death toll is 60,000 and rising, with millions more people displaced. Under international law, Russia has to pay for the damage that it has caused, yet so far it is the British taxpayer who has forked out £2.3 billion in military support and another £220 million in humanitarian aid. Secrecy and inertia are enabling this—two main reasons why our sanctions regime is not working and why we need to do more than what is contained in this amendment.

I have sympathy with the Government. The sanctions regime relating to Russia was hastily constructed, as I suggested at the outset of my remarks, in the wake of a conflict that has shocked the world. The seizure of assets that belong to individuals is certainly a complex issue. The rule of law, due process and property rights should all be considered, as I discussed with the noble Lord, Lord Sharpe. This is exactly why the Government must not miss the opportunity in this Bill to make a difference, without violating any of these principles.

Our allies have already put wheels in motion. The European Union is looking to seize €300 billion of frozen Russian central bank reserves and €19 billion in oligarch assets that it holds, while Canada has made good progress on a law to allow the seizure of frozen assets. What study have we made of what is happening elsewhere in the world? Should we not emulate those pieces of legislation and ensure that we act in concert? If the Minister thinks that I am asking the UK Government to go it alone on these things, I can assure him that he is mistaken. I recognise that we have to do this with others, but others seem to be ahead of the game. As it currently stands, I do not feel that this amendment is the way we should proceed. I look forward to hearing what the Minister has to say in response.

[Lord Fox (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Alton. Briefly, I am trying to get a sense of the proportion of this amendment. The noble Lord set a high expectation bar, whereas the Minister seemed to set a low one. I think that I heard the Minister say that it clarifies something that already exists, which sounds a little like fiddling around the margins, so it would be helpful if he could explain what this does that we cannot do already and how many cases will be brought as a result of having this power that are currently impossible to prosecute. In other words, what is this actually for, how many people do we expect it to be applied to and what sort of scale of penalty does he envision would be applied? Without that context, we will all leave the Room feeling that it really is fiddling around the margins. If he could give us a sense of scope and scale, he may be able to send us away with a slightly stronger feeling about this otherwise modest amendment.

16:00

[Baroness Blake of Leeds (Lab)]

I will add some brief comments. I thank noble Lords for their contributions. I would like to understand whether this is adequate in terms of the opportunity that we now have. We know that if we miss this opportunity now, the risk is that it will not come round again for a long time. As we have heard, the situation is desperate and there have been enormous failings. I ask the Minister who will monitor the success of this and, assuming that the amendment is agreed, whether we will have an opportunity in future to understand whether it is having the desired impact.

The point has been well made: looking at other countries and other collections of companies around the globe that are grappling with this issue, are we missing a trick? Is there more that we could do at this stage? Context is everything. We have heard about the gaps that exist and the fact that too many people are getting away with not fully complying with the sanctions. We as a country need to take that very seriously. I would appreciate the Minister’s response to those questions, for clarification.

[Lord Goldsmith of Richmond Park (Con)]

I thank noble Lords for their contributions to this short exchange. I will start by addressing some of the points raised by the noble Lord, Lord Alton, who, as I have said many times—we seem to find ourselves in the same debates—is an indefatigable champion for human rights and has shone the light so often on abuses in China, Hong Kong and beyond. It is worth putting that on the record again. I am afraid that I cannot tell him what was raised in discussions between the Foreign Secretary, the Prime Minister and representatives of the CCPIT. I do not have that record, but I will try to uncover an answer for him in due course; I know that my colleagues will have taken a note of his question.

The noble Lord and the noble Lord, Lord Fox, are right to point to the scale of this amendment. A new package is not being introduced; that is not what this amendment is about. That is not to say that changes are not required or that no more can be done with the tools that have been assembled by the Government, not least through SAMLA, but this amendment is just a tidying-up exercise; it is about removing ambiguity. It will not answer the calls that we have heard from speakers in this debate, but it is not designed to. We have the tools that we need. As I mentioned, we now have SAMLA and the ability to tailor a specific sanctions regime using secondary legislation. The noble Lord, Lord Alton, is right that we should focus on using those tools to the maximum effect. There are plenty of places, organisations and people who perhaps ought to be on the sharp end of that sanctions regime. I cannot go into detail—I do not think that any Minister can or would—about any potential future sanctions, not least because doing so and highlighting them now would reduce their impact, but we are always looking to update the—

[Lord Alton of Liverpool (CB)]

I am grateful to the Minister. Will he look again at a proposal that a number of us have put before the House at various times for some degree of parliamentary oversight of the so-called Magnitsky sanctions? At the moment, they are opaque. Often, they seem very random and arbitrary: some are chosen and some are not. There may be good reasons for that. I recognise that we cannot sit in an open committee and discuss these things but, in camera, there is no reason at all why a Joint Committee of both Houses or one of our senior Select Committees, such as the House of Lords International Relations and Defence Committee, which is charged with looking at issues of genocide, for instance, should not be able to look at the details of sanctions and how and why they are imposed. I do not expect a straightforward reply from the Minister now, but will he give an assurance that he will look again at the way in which this regime is determined?

[Lord Goldsmith of Richmond Park (Con)]

The noble Lord makes an important point. I cannot answer it, because it is not an area over which I have any direct responsibility, as he can probably tell. However, it would be beneficial somehow to design a mechanism which would allow greater oversight. I do not know what that would look like, because there are risks associated with it. If the targets of any particular sanctions regime became aware in advance, we know what would happen. It is not an easy problem to solve, but in principle what the noble Lord has just said makes a lot of sense. If there is a way of doing so and injecting a bit more transparency—but not too much, for all the obvious reasons—I would certainly support that.

It is also worth saying that sanctions are just one tool that we have. For example, in relation to Hong Kong, as noble Lords know, we opened the doors of this country to a very large number from Hong Kong who were looking for safety and a home, where their fundamental rights would be respected. We created a bespoke immigration channel and suspended the UK- Hong Kong extradition treaty indefinitely. We extended the arms embargo that has applied to mainland China since 1989 to include Hong Kong—and so on. This is one tool in our arsenal; it is not the only tool.

I make one further point in relation to something raised by the noble Lord, Lord Alton, on the distinction between freezing and seizing. While I cannot provide him with a detailed answer—that is going to have to come from another Minister—I can tell him that the Government are sympathetic to proposals to use frozen funds to assist in the reconstruction of Ukraine following the bombardment that it has received from Vladimir Putin. The Government are actively looking at options continually to improve transparency around those assets that are held by—

[Baroness Kramer (LD)]

Just for clarification, the Minister said that there was an intention to use frozen funds for the reconstruction of Ukraine. I fully support that idea, but is it legal without a seizure?

[Lord Goldsmith of Richmond Park (Con)]

I have said that there are “proposals”. It is something that has been proposed, but I am not sure that I can use the word “intention”. If there is a way in which those frozen assets can be used to rebuild Ukraine, it is something that the UK Government will look very seriously at—but it is not something that the UK alone will be doing.

[Lord Fox (LD)]

To make the necessary legislation, the Government would need a Bill in which to do it, and this would seem to be the Bill that is tailor made to have those discussions. Could the Minister encourage colleagues to use this Bill as the medium by which the seizure process may be made legal?

[Lord Goldsmith of Richmond Park (Con)]

I thank the noble Lord, but I do not know what the legislative mechanism would look like to make that possible. I am afraid that it is something that I am going to have to—

[Baroness Altmann (Con)]

I thank my noble friend for giving way. I realise that he is in a somewhat difficult position, but I add my encouragement to him to discuss with colleagues the possible amendments that we have laid—

[Lord Fox (LD)]

Amendment 85.

[Baroness Altmann (Con)]

Yes, Amendment 85 would allow seizure of assets with a view, one hopes, eventually to being able to use them to reconstruct Ukraine in this case, but for other purposes as well. It would be an ideal way to pave the way for this to happen.

[Lord Goldsmith of Richmond Park (Con)]

The noble Baroness makes a similar point. It is not for me to determine the legislative or other route for achieving the possibility of using those frozen assets. It is something that I know that the Government are looking at and are sympathetic to, but I cannot go into any further details, because it is not an area where I have any particular expertise or authority. But I know that the Government are looking closely at the possibilities of doing so and recognise that there is a huge value in doing so, if we can.

[Lord Alton of Liverpool (CB)]

My Lords, I shall not intervene again on this, but I am extremely grateful to the Minister. To return to the point that the Minister’s noble friend Lady Altmann has just made, to those who took part in the debate on Amendment 85 last week, which would do some of things that he has just described, it was suggested that we might have a chance to meet the noble Lord, Lord Sharpe, again before Report. It would be helpful if the Minister could at least in principle assure us that such a meeting will take place with those who participated in that debate last week. Other noble Lords and noble Baronesses, such as the noble Baroness, Lady Kramer, could be invited as well—those who are interested and are Members of the Committee—to see whether we can build on Amendment 85 to do some of the things that I was very pleased to hear the Minister just say that the Government are keen to do.

[Lord Goldsmith of Richmond Park (Con)]

As the noble Lord knows, I have not had an opportunity to consult my noble friend Lord Sharpe, but I am delighted to volunteer him for such a meeting—I am sure he will be very happy.

I will move on briefly to the question about who will monitor—I am so sorry; I cannot remember who made the point. The answer is that a government department is responsible for that, so if it is a financial sanction, HMT will be responsible for ensuring that it is working and successful, and if it is transport, it will be the Department for Transport, and so on.

This is a small but important change to ensure that we have a firm basis for enforcement action. It will provide greater clarity and reinforce those enforcement powers by making them explicit, removing ambiguity. The amendment should also demonstrate that the UK Government take their sanctions enforcement responsibilities seriously, and we will continue to intensify our enforcement of those sanctions. I hope that noble Lords will support it.

Amendment 91A agreed.

Amendment 92

Moved by

[Baroness Kramer]

92: After Clause 187, insert the following new Clause—
“Whistleblowing: economic crime
(1) Whistleblowing is defined for the purposes of this section as any disclosure of information suggesting that, in the reasonable opinion of the whistleblower, an economic crime—(a) has occurred,(b) is occurring, or(c) is likely to occur.(2) The Secretary of State must by regulations made by statutory instrument, within the period of 12 months beginning with the day on which this Act is passed, set up a body corporate, to be known as the Office for Whistleblowers, to receive reports of whistleblowing as defined in subsection (1). (3) Regulations under subsection (2) may not be made unless a draft of the statutory instrument containing them has been laid before, and approved by, each House of Parliament.(4) The Office for Whistleblowers must—(a) protect whistleblowers from detriment resulting from their whistleblowing,(b) ensure that disclosures by whistleblowers are investigated, and(c) escalate information and evidence of wrongdoing outside of its remit to such other appropriate authority as the regulations may provide or otherwise as the Office may determine.(5) The objectives of the Office for Whistleblowers are—(a) to encourage and support whistleblowers to make whistleblowing reports,(b) to provide an independent, confidential and safe environment for making and receiving whistleblowing information,(c) to provide information and advice on whistleblowing, and(d) to act on evidence of detriment to the whistleblower according to such guidance as may be set out by the Secretary of State in the regulations.(6) The Office for Whistleblowers must report annually to Parliament on the exercise of its duties, objectives and functions.”Member’s explanatory statement
This amendment would require the Secretary of State to set up an Office for Whistleblowers to receive reports of whistleblowing in relation to economic crime.

[Baroness Kramer (LD)]

My Lords, I understand that the noble Earl, Lord Minto, will reply for the Government on this amendment, which gives me the opportunity to welcome him to his role on the Government Front Bench. We shall look forward to hearing him—indeed, I hope to hear very positive responses from the noble Earl. This is also my opportunity to thank the noble Baroness, Lady Altmann, and the right reverend Prelate the Bishop of St Albans, who join me in proposing Amendment 92. I hope that we will hear from both of them.

My amendment is similar to amendments that I brought before your Lordships’ House in previous Bills in that it sets up an office of the whistleblower in relation to economic crime, which must support whistleblowers, protect them from detriment and ensure that disclosures are investigated and acted on. I will not go into a lot of detail because I have done so often in this House and we are under pressure of time today. However, whistleblowing legislation in the UK is badly out of date. The Public Interest Disclosure Act 1998 provides for confidential disclosure by whistleblowers who are “workers”, which is quite a difficult term. It means employees but not all—it may include some contractors—and there are many people you would think of as being workers who do not count. That group of workers can make disclosures to prescribed people, in this case primarily the financial regulator.

However, of course, most whistleblowers have spoken out long before they make a formal report, having already alerted colleagues and management to wrongdoing. Some firms have decent internal whistleblowing reporting systems, but many do not; for many, it is a system on paper and not a system in fact. Indeed, in many cases, the information disclosed by a whistleblower, even if anonymous, exposes their identity because of the few people who would have access to that particular knowledge.

The consequence is that many whistleblowers are subject to retaliation. Many lose their careers, or, if they are outside contractors or clients, their businesses. If they are workers, they can challenge in an employment tribunal. However, I tell your Lordships now—the Minister can confirm it if he wishes to look—that that will cost them their savings and all they can borrow from their friends; it costs something between £44,000 to £100,000 to be able to bring a case, and of course there is no legal aid. It will drag on for years; we have had cases going on for seven years, finding steadily in favour of the whistleblower but constantly appealed by the institution or employer on the other side.

In the end, most whistleblowers settle and sign non- disclosure agreements. People break down and their careers shudder to a halt as they are informally and very effectively blacklisted. Of course, there is no formal blacklisting, but word of mouth through an industry essentially bars most of them from any future opportunity.

16:15

So it is not a wonder that so many in the UK choose not to be martyrs, knowing the cost, and do not speak out. Those who do so are lauded but then left to fend for themselves. No regulator has ever given evidence to an employment tribunal in defence of a whistleblower. It is no wonder that, in the financial services sector, PPI, Libor, money laundering, derivatives mis-selling and mini-bond scams have all flourished in the UK.

Part of the problem is cultural. The FCA looks to supervision and monitoring to deal with wrongdoing, with whistleblowing as a minor adjunct, and basically treats it as a complaints system. In the United States, the Securities and Exchange Commission declares itself on its website to be the “whistleblowers’ advocate”. Speak to any US financial regulator and they will tell you that they could not police the huge, complex world of financial services, where the incentive of money so often tempts people, without a “citizens’ army”—I am quoting a federal prosecutor—of whistleblowers.

Some 80% of successful financial prosecutions in the US depend on whistleblowers, so let me illustrate with some numbers. Since the Office of the Whistleblower was set up in the Securities and Exchange Commission in 2010, under the Dodd-Frank Act, the SEC and its related regulator, the CFTC, have recovered $2.8 billion, due primarily to whistleblowers. A related $7.2 billion has been recovered thanks mainly to whistleblowers under the Foreign Corrupt Practices Act.

I cannot get equivalent numbers for the UK—perhaps the Minister can—but I can tell you this: in 2021-22, the FCA took significant action on only three whistle- blowing reports and lesser direct action on 96 cases. The Securities and Exchange Commission in the same year took significant action on 3,000 cases, most of them resulting in successful prosecutions. The issue is not just harmful to the UK but a major international embarrassment, with many UK financial whistleblowers now turning to the US regulator; in fact, they do a fairly regular roadshow to try to get the message through that the US regulator is available.

In March, the Government agreed to review the whistleblowing framework, but I am very troubled that I can find no assurances that they are looking beyond minor tweaks. So I ask the Minister very directly: can he assure me that an independent office of the whistle- blower or something similar to that is part of the research that is being done to revise this framework and is under serious consideration?

The FCA has just revised its whistleblowing policy. It carried out a survey, which revealed whistleblowers’

“significant dissatisfaction with their experience of whistleblowing to the FCA”.

It was actually appalling; the FCA could barely find anyone who thought they had had a reasonably satisfactory experience. The changes that it is introducing to deal with this problem focus mostly on informing whistleblowers of what is going on with their information. That is important, but it is the least change that the organisation could make. There is not an ounce of additional protection for whistleblowers who are subjected to retaliation.

I am quite troubled because we have just had the new fraud strategy issued and—I may be wrong because I had to skim it very fast—I cannot find “whistleblowing” or the other term that is sometimes used, “speaking out”, in there. Perhaps the Minister could direct me. I point this out because any auditor or compliance officer will tell you that 40% of fraud in financial services is exposed by whistleblowers and has been missed by the auditors, compliance officers and others who are doing supervision and monitoring. To anyone who thinks that 40% is a satisfactory number, I would say that there should be a whistleblower in every case of wrongdoing. There are always people who know what is happening and know that it should be challenged and reported.

The current situation cannot continue. I am obviously going to withdraw my amendment today, but I want to hear from the Government a real commitment to change, to provide a proper framework and context for whistleblowers—one that includes some form of independent office that can stand up on their behalf, stand between them and the powerful employer or institution, and cover those people who do not qualify as workers. It does not have to mirror the US system; that merely stands as a lesson in what can be achieved when there is not only recognition of the significance of whistleblowing but a commitment to make sure that it serves our community by giving us the earliest possible notice of wrongdoing and acting as an extremely effective deterrent.

[Baroness Altmann (Con)]

My Lords, I support Amendment 92, so ably and powerfully moved by the noble Baroness, Lady Kramer. I have added my name to it because, as I have personally seen, this issue is potentially beneficial yet in practice harmful in the financial services sector. It is very often a career-ending move if somebody decides to blow the whistle on fraudulent practice or wrongdoing in their place of work. I had a friend in the City who ended up blowing the whistle but only because she had already decided she was going to retire. She knew that it would be the end of her career and she did not wish to go to the expense of a tribunal, but it was the early warning that the authorities needed to discover that wrongdoing was going on. The problem we have is that those who are inside are best placed to identify the wrongdoing before it becomes more widely known and before more people are perhaps damaged by whatever the wrongdoing is, yet, as the noble Baroness, Lady Kramer, described, there is inadequate protection to recognise the benefits of having a canary in the coal mine being able to identify directly that something is amiss.

Therefore, I hope that we would be able to accept that having an independent office that can oversee and provide a safe space for individuals to notify their concerns, presumably having raised them internally first, could be very helpful in fighting economic crime and fraud. Normally, you would suggest that somebody raises a concern internally, but they might feel that that could be detrimental—there have been threats to people’s lives when they have blown the whistle, so it is not just a financial matter.

I warmly welcome my noble friend to his place. I look forward to hearing his answer and thank him for his engagement with me so far. I look forward to speaking to him on this issue and perhaps others as we proceed with the Bill. I hope that he will be able to accept that there are reasons why the Public Interest Disclosure Act is inadequate and why putting an amendment of this nature in this Bill makes enormous sense. I hope that we will therefore be better able to uncover criminal offences, fraud and deliberate cover-ups that it is in the public interest to expose rather than waiting for after-the-fact things to emerge having caused much more damage.

[The Lord Bishop of St Albans]

My Lords, I think I can be quite brief thanks to the noble Baroness, Lady Kramer, as I have been able to ditch most of what I was going to say because she has already made it so clear. I was persuaded to put my name to this amendment simply because I met a woman in one of my churches on a Sunday after worship who is currently in precisely this situation, and her whole life has basically fallen apart.

She came across something that it was clear to her was wrongdoing; she agonised for weeks and tried to take advice, which was difficult to get because of confidentiality. Eventually she decided that she needed to blow a whistle. She was immediately suspended, taken through a disciplinary process and dismissed. She is now trying to decide whether she can afford to take this through the courts. Her view is that she would probably have to sell her house to do so. It really is a David and Goliath situation.

As has been said, often the best people to spot what is going on are not necessarily the auditors—they try their best, but it is difficult for them; we see constantly how they do not always manage to spot what is going on and get an accurate picture—but those on the inside. Since the whole of our financial services sector, which is one of our great achievements and a fantastic part of our life, relies ultimately on trust—our greatest currency in this country—the integrity issue absolutely kicks in. In a world in which trust is at a low ebb, this is terribly important.

The reason people give for not wanting to be a whistleblower is the cost. A public consultation conducted by the European Commission revealed that the most common reason for not wanting to come forward with allegations of wrongdoing was simply the fear of legal consequences, which 80% of individual respondents reported as their primary reason. After that came fear of financial consequences at 78% and fear of what it would do to your reputation at 45%. As the noble Baroness, Lady Kramer, said, an informal blackballing goes on behind the scenes. The woman I mentioned is now fairly clear that, even if she wins this case, it is very unlikely that she will ever get another job in the financial sector. These are legitimate fears. A 2021 survey conducted by the charity Protect found that over 60% of whistleblowers reported experiencing negative consequences such as being dismissed, victimised or subject to harassment or bullying.

I hope that His Majesty’s Government will look closely at this or at somehow strengthening how we can support whistleblowers, for the long-term prospering of financial services in this country. I look forward to hearing the Minister’s response to this amendment.

[Lord Cromwell (CB)]

I support Amendment 92 in the name of the noble Baroness, Lady Kramer. I have for a long time supported the better treatment of whistleblowers, who are treated appallingly badly. It is a difficult task, because many organisations—no matter how big their policy on whistleblowing—immediately close ranks against the whistleblower, who often starts out as someone trying to help and not even feeling that they are a whistleblower.

I will illustrate this briefly with two points. When I asked an Oral Question on whistleblowing some time ago, one of our esteemed colleagues, who is no longer with us, was sitting near me and said, “What are you asking about? Whistleblowers? Do you mean snitches?” In my Question, I was going to name someone in the financial services world whose solicitor contacted me minutes before I stood up to say that they had changed their mind and asked me not to name them, because they were so frightened of what would happen to them as a result. That makes a strong case—as do the powerful speeches that we have heard—for having a body such as an office for whistleblowers.

I was on an interesting call a little while ago with people interested in whistleblowing in America. It struck me how interested the investors were. One of them said, “I’ve put several million into this company; I want to hear from whistleblowers and know what’s going on with my money”. You do not hear that often enough. Investors have a direct interest in whistle- blowers delivering proper information about what is going on.

To help bolster even further my emphatic support for this amendment, I have a couple of questions for the noble Baroness, Lady Kramer. First, how would the office do what it is required to under subsections (4)(a) and (4)(b) of the proposed new clause? Secondly, can she clarify—the noble Baroness, Lady Altmann, touched on this—when the office for whistleblowers would come into play? Is it from the beginning or at the end, as a last recourse? How would it interact with the employer? I am not quite clear about how that would work. Fear not: I am entirely in support, but it would help me to have some clarity on those points.

16:30

[Lord Agnew of Oulton (Con)]

My Lords, I support the amendment tabled by the noble Baroness, Lady Kramer. I welcome our new Minister to the hot seat. I will not speak for long because we have heard the main arguments but, for me, as a businessman, whistle- blowing is an extremely cost-effective way of uncovering bad practice at scale. We have so many examples, such as the Post Office Horizon scandal and the Danske Bank laundromat, one of the largest recent financial crimes in Europe, involving some $230 billion of illegal Russian money, which came alive because of whistle- blowing through UK limited partnerships.

We know that the system is not working. Only about 4% of whistleblowers who take cases at the moment end up being successful. They take huge risks, as we heard from the right reverend Prelate. As usual, we are falling behind in the world league of effectiveness. The US National Defense Authorization Act creates a new whistleblowing programme and establishes a private right of action for whistleblowers who have experienced retaliation.

I ask my noble friend the Minister why we are so timid about this. I accept that he is newly in post, but I would like some evaluation of why we are told that a new office for whistleblowers would be expensive. I do not believe that it would be expensive; it would save money because it would create one focal point for all those with legitimate claims to go to, in addition to the money that would be recovered from economic crime. As we also know, we are awash with economic crime, so why not take this simple step towards dealing with it?

[Baroness Blake of Leeds (Lab)]

I add my thanks to everyone who has put so much effort and work into this issue over a significant amount of time. I thank everyone for their contributions, which have given powerful testimony of those who have suffered. We should note the fact that so many noble Lords in this Committee alone personally know people to whom this has happened.

I confirm that we support this amendment and I look forward to the Minister’s comments about the request for creating an office for whistleblowers. As has been said throughout the debate, it is clear that facilitating whistleblowing would go a significant way to tackling economic crime, whether fraud, money laundering or other crimes. I thank the noble Baroness, Lady Kramer, in particular for her comments about the importance of the earliest possible notice of wrong- doing, which is a key point in this discussion.

I emphasise that the stakes remain too high for an informed insider wanting to blow the whistle. This amendment would be a good starting point. I am not convinced that it will solve all the problems, but we need to see some progress. Too many people are suffering and we need to recognise those individuals as well as the impact on the businesses involved. As the noble Baroness, Lady Altmann, said, the sad truth is that too many people wait until they are leaving a company—either moving on to another or, in the case she mentioned, retiring—before finding the courage to stand up.

I understand there is going to be a review, but surely we have an opportunity now, with this Bill, to make some bold change. I thank the charity, Protect, for its briefing under Speak Up, Stop Harm, which has some very important information that we should all consider. To reference the debate that took place in the Commons, there was strong cross-party support, encouraging support and advice for whistleblowers. I am concerned that the government line remains that taking these important steps is too expensive. I really cannot understand that line of argument. Surely, we should regard this as an investment and not a cost. Tom Tugendhat MP promised more discussion on these matters as part of the debate. Can the Minister inform us where this has got to?

We support the creation of an office to give encouragement and support making reports. We want an ability to provide advice and, most particularly, to act on evidence of detriment to whistleblowers where we know that it occurs. The point in the amendment about making an annual report to Parliament is also important. One area on which I think it would be possible to move is to bring forward the requirement for all organisations to have a proper policy in place as a vital and effective route to preventing crime, which would mean that the courts could use evidence of this as good practice.

As I am sure all noble Lords have seen, 65% of callers to Protect’s confidential advice line say that they have suffered for speaking out, which of course is in direct contravention to the Public Interest Disclosure Act and, therefore, as amended, the Employment Rights Act. This is a very serious issue, which should be picked up and dealt with immediately.

On furlough payments, 41% of clients who contacted the advice line who suspected that fraud was taking place were ignored; 90% attempted to raise concerns with their employer before going to the helpline but, unfortunately, many small organisations still have nowhere to go. It is a matter of how these changes could support businesses that want to do the right thing but do not have the wherewithal to do it.

I look forward to the Minister’s responses to all the points that have been made today. Let us treat this issue with the seriousness that it deserves, as it is an important way in which we can help those who have received information that they want to act on. In the spirit of the Bill itself, it is a vital and effective route to preventing crime.

[Lord Browne of Ladyton (Lab)]

I support the amendment and commend the noble Baroness for tabling it, as well as those who support it. I do not intend to go over anything that anybody else has said about whistleblowing, but I agree with them. I am not in any sense an expert on whistleblowing, but I am speaking because I think I have anticipated in two areas what the Government’s response will be. First, I think that we are all conscious that a review of whistleblowing has been instructed. However, I cannot find in any commentary about it or any of the announcements from the Government whether the possibility of that review recommending the setting up of an office of whistleblower is part of its remit. It does not seem to be—and that brings me to the point that I really want to make.

Some of us contributed to the debate on the Private Member’s Bill on the protection of whistleblowing in the name of the noble Baroness, Lady Kramer on 2 December—I think its formal title is the Protection for Whistleblowing Bill—and because Part 2 of that Bill related to the setting up of an office of the whistle- blower, we have had the benefit of the noble Lord, Lord Callanan, telling us what the Government’s position is. I expect to hear that the Government’s position is that the existing framework provides 80 prescribed persons to whom people can legally blow whistles, many of whom are regulators, that the very diversity of that framework does not need this overarching body because it would not be able to deal with the complexity underneath it, and that should a new body have such a function,

“it would require significant staffing resources, with diverse expertise across a range of sectors, to enable it to carry out these functions effectively”.—[Official Report, 2/12/22; col. 2044.]

In other words, it is not necessary.

That can be said, and that framework exists, but to test whether that is right, I ask the Minister in response to tell us just how effective the framework is. What do these existing regulators and others actually do? What does the data show of their effectiveness? How attractive are they to whistleblowers? How many successful processes have there been—how much criminal or other wrong activity has been uncovered by them, say in the last five years or so—and just how effective have those processes been?

I spoke in that debate on 2 December and I spent quite a bit of time looking for that data, but it does not seem to exist anywhere—there does not seem to be any data that shows how successful the existing framework is. Does the Minister have the data on the number of cases that pass through the current regulatory system, as well as the data on the impact of that? If that data shows what I suspect it does—but only from anecdotal evidence because there is no empirical evidence—then this process is ripe for complete restructuring.

For all the reasons shared with your Lordships’ Committee by the noble Baroness, Lady Kramer, so competently and in such an informed way, the obvious restructuring is to follow the success of the United States of America, where the creation of an office for whistleblowing has dramatically improved the effectiveness of whistleblowing to an extraordinary degree.

It seems that the fundamental problem—this is part of the problem we have got ourselves into with economic crime—is that the infrastructure we have in any part, either to prevent, detect or prosecute it, is just not of the scale of what is going on in our country. We need something that concentrates some very special resources in a way that makes whistleblowers comfortable to deal with them, protected by the state when they blow the whistle, and where the information they give is properly acted on so that it has the results that we need. I hope that when, as I expect, the Minister pushes back on this amendment, he will be able to tell us where that is in the existing framework. If it is not there, we need an office for the whistleblower, and when we get it is just a question of time.

This is an opportunity we have now. Most of us in your Lordships’ Committee have experience of just how difficult it is to get opportunities for legislation that makes this sort of fundamental change. We should grasp this one when we have it. If we have to build upon it beyond economic crime later on, so be it, but we should do it now.

16:45

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, I first draw attention to my interest as set out in the register, as a non-executive chairman of Not Another Bill Limited. Secondly, I want to thank noble Lords for their warm welcome to the hot seat, which is much appreciated.

I am pleased to be able to represent the Department for Business and Trade in my new role as Minister of State. I thank all noble Lords for their inputs into the debates so far and express my pleasure at being able to speak today on this amendment. I also thank my ministerial colleague and noble friend Lord Johnson of Lainston, who is indeed in Hong Kong, for his support in preparation for today’s debate.

Moving on to the Bill itself, I thank the noble Baroness, Lady Kramer, for raising the important matter of whistleblowing. As a former co-chair of the All-Party Parliamentary Group for Whistleblowing, she has continuously highlighted the important role that whistleblowing plays in shining a light on wrongdoing. The Government have a significant interest in ensuring that our whistleblowing framework is robust. An effective whistleblowing framework is a vital part of the UK’s ability to tackle corruption and all forms of economic crime and illicit finance. As these acts are by their very nature often covert, those working for an organisation can be a key source of intelligence for authorities.

My concern with this amendment, however, is two-fold. First, these reforms risk duplicating elements of the existing framework, leading to a confused landscape, and potentially at considerable cost. As I understand it, this position was explained by my noble friend, Lord Callanan, during Second Reading of the noble Baroness’s Protection for Whistleblowing Bill in December last year. So I will not go into detail here but, just to recap, the Government are concerned about how such an office would interact with the role of regulators. As has been mentioned, a new body could also come at a considerable cost, as it would require significant staffing resources, with diverse expertise across sectors, to enable it to carry out these functions effectively.

Secondly, it would be premature to make legislative change ahead of the review of the whistleblowing framework, which everybody has mentioned. The review, which the Government launched on 27 March this year, will examine the effectiveness of the whistleblowing framework in meeting its intended objectives—that is, to enable workers to come forward to speak up about wrongdoing and to protect those who do so against detriment and dismissal.

The noble Baronesses, Lady Kramer and Lady Altmann, asked whether the review will consider the merits of establishing an office for the whistleblower. The review will consider evidence related to the effectiveness of the whistleblowing framework in meeting its intended objectives. This is to enable workers to come forward to speak up about wrongdoing, and to protect those who do so against detriment and dismissal. As the right reverend Prelate explained, proper protection is needed against terrible misery and personal risk.

The review will consider a number of topics that are central to the whistleblowing framework. These include: how workers are defined for whistleblowing protections; the availability of information and guidance for whistleblowing purposes; and how employers and prescribed persons respond to whistleblowing disclosures, including best practice. The research for the review will conclude in autumn 2023. The full terms of reference for the review are published on GOV.UK.

There have been a number of very specific questions. I think that I have written down all those on data so, if it is all right with noble Lords, I shall respond swiftly in writing to some of the specific questions that were asked. There is no doubt that there is a lot of data behind this amendment; it is important that proper answers are provided.

[Lord Browne of Ladyton (Lab)]

I thank the Minister for giving way. On 2 December, I asked the noble Lord, Lord Callanan, whether he could provide the data on the performance of regulators and other prescribed persons in relation to whistleblowing, specifically asking the same question that I asked the Minister. He did not answer it then and he has not written to me. Does this data exist? I suspect that it does not.

[The Earl of Minto (Con)]

I do not know whether it exists; if it does, I shall find out and let the noble Lord know. I think it must exist, but we will have to see. The other important issue was the expense of going to a tribunal, which is a very serious issue. My understanding is that the review will certainly take that into consideration.

Not long after taking office, my ministerial colleague the parliamentary Under-Secretary of State, Kevin Hollinrake MP, committed during the Public Bill Committee in the other place to get this review moving. We have followed up on this commitment and continued to deliver on whistleblowing policy. On 17 October last year, the Government laid before Parliament the most recent update to the prescribed persons order. This came into force in December and is a significant improvement to the framework, adding six new bodies and all Members of the Scottish Parliament to the list of bodies and individuals that a worker can blow the whistle to. I hope that demonstrates to noble Lords that the Government are very serious about whistle- blowing.

I welcome the continued constructive engagement on this topic, and I know that Minister Hollinrake has valued the discussions to date with parliamentarians and organisations representing whistleblowers in preparing for this review. However, this amendment could create a confused landscape for whistleblowing, potentially at considerable cost. It would also pre-empt the ongoing review of the existing framework. I therefore respectfully ask the noble Baroness, Lady Kramer, to withdraw it.

[Baroness Kramer (LD)]

My Lords, I thank all noble Lords who have spoken in this superb debate. I thank the noble Baroness, Lady Altmann, and the right reverend Prelate the Bishop of St Albans for giving those personal examples. They bring home to people the experience that we are trying to deal with, so that people can relate to them and ask “Would I be brave enough? Would I let this happen to me and my family?” and understand why whistleblower protection is so important.

There were some specific questions. First, if ever I have seen a red herring, this question of cost must be it. In the United States, the Office of the Whistleblower has turned into a profit centre for the US Treasury, because the number of cases it can drive through and the consequences of remuneration, fines and compensation have meant that it not only covers its costs but can return substantial amounts to the Treasury. The Minister is most welcome to get the latest figures on those. I do not have them in front of me, but he will be able to access them very easily. So cost is not the issue.

We are often told that we will need an enormous, monstrous octopus of an office. That is not what we are talking about. We need a place where people can go and know that their disclosure is absolutely safe. As other noble Lords have said, including the noble Lord, Lord Cromwell, people want to know that there is genuine follow-up on the issue. He asked how the language of my amendment on investigation would work. It would work by acting through the regulators. I have had many a conversation with regulators and, interestingly, they are all desperate for something like the Office of the Whistleblower, because dealing with whistleblowing is completely outside their standard remit—how they structure themselves and hire their personnel. This creates that exchange with the Office of the Whistleblower as a director of the information to the regulator. That dynamic gives us the assurance that there will be action. The office can chivvy if action does not follow.

The noble Lord, Lord Cromwell, also asked how the office of the whistleblower would protect individuals from detriment. This is a very abbreviated amendment because it has to come within the scope of the Bill. My Private Member’s Bill deals with the issue in far greater detail, but the logic of it is basically that, when the office determines that a whistleblower has received detriment, it will be able to order the employer—although this applies to all whistleblowers, so it is a broader picture—to provide compensation. However, if that employer or company decided that the compensation was inappropriate, it could take the office of the whistle- blower to the First-tier Tribunal. But in that case, facing each other, you would have the institution of the office of the whistleblower and the institution of the employer or organisation on the other side. You would not have the David and Goliath situation of a poor, lonely whistleblower who has already spent all their savings and is borrowing money to continue their case facing an employer which can afford to pay for the best counsel in the country and continue to drag out the entire process on appeal after appeal. So it changes that dynamic.

I refer noble Lords back to my Private Member’s Bill. I have always said that I am not precious about exactly how all this is done, but the core principles of it need to be seized and taken. I am sad that the Minister again uses the term “workers”, because there are so many people who blow the whistle, including contractors, suppliers and customers, and they are all often subject to retaliation and blacklisting—and that matters.

I think that I have covered most of the questions that were asked, but I would be glad to continue this conversation off-piste rather than take up more time in Committee today. This is an absolutely fundamental issue. One opportunity in this Bill is to echo how it has been done in the United States, where the Office of the Whistleblower is set within a financial services regulator structure, and this amendment would enable that to happen—or there is the alternative to going to a much broader office of the whistleblower. When you talk to the regulators dealing with education, the National Health Service, nuclear waste or whatever else, they will all say, “For goodness sake, can you take this burden of dealing with whistleblowers off my shoulders? I really need a professional and focused organisation sucking in this information and making sure that I get what I need to act as a regulator”. I can assure the Minister that, while none of them says it publicly, he will find that, privately, the regulators are very much in support of this kind of arrangement. I beg leave to withdraw the amendment.

Amendment 92 withdrawn.

Amendment 93

Moved by

[Lord Coaker]

93: After Clause 187, insert the following new Clause—
“Unexplained Wealth Orders and Vulnerable Adults
(1) The Secretary of State must commission a report each year on Unexplained Wealth Orders where the wealth or property in question was obtained through economic crime.(2) The report must record all cases where Unexplained Wealth Orders have been used in the previous year and revealed cases where property or wealth has been taken from—(a) older people;(b) people living with disabilities;(c) people who use adult social care;(d) adults who lack mental capacity.(3) This first report must be laid before each House of Parliament one year after this Act is passed.(4) Thereafter it must be produced annually.”Member’s explanatory statement
This amendment probes current data kept by the government on property and wealth obtained through economic crime being taken from vulnerable adults.

[Lord Coaker (Lab)]

In the absence of my noble friend Lord Hunt, and with his apologies, I move Amendment 93 in his name. I shall leave the noble Lord, Lord Faulks, and the noble and learned Lord, Lord Garnier, to speak to their amendments, but I agree very much with the points made in Amendment 95.

This is one of those parts of the Bill that we are dealing with in Committee which seems like a very small part of a huge reform that the Government are undertaking with respect to economic crime. However, given that unexplained wealth and the proceeds of crime are an affront to us all, successive Governments—because under the last Labour Government I was involved in the passage of the Proceeds of Crime Act —have singularly failed to ensure that those who benefit from crime do not somehow evade their ill-gotten gains being taken back from them by the state. That is despite the Proceeds of Crime Act and the unexplained wealth orders—and the first part of the amendment would require a report from the Government on unexplained wealth orders.

17:00

It is essential that the Government do this and come forward with a report—no doubt the noble Lord, Lord Faulks, and others will emphasise this—because, while these unexplained wealth orders have been available since January 2018, only nine have been issued, in four cases. According to a House of Commons research paper dated April 2022, none have been issued since the end of 2019.

In the absence of a regular report, can the Minister update the Committee on how many unexplained wealth orders there have been, how much money we have been able to get back from criminals as a result of them, and why the uptake is so low? I read the Government’s paper with respect to this. It basically says that it is very difficult and technical, that we have to proceed carefully, and that it is just one tool in the box.

I know the Minister will not thank me for my next question. With unexplained wealth orders vastly underused, the Government’s key facts paper talks about the need to use the Proceeds of Crime Act. It says that

“the Proceeds of Crime Act 2002 is a complex and technical Act and reform requires careful consideration and consultation”.

Will the Minister comment on why it has taken 21 years for that careful consideration and consultation to take place? The Government say that, except in certain circumstances, unexplained wealth orders are not really necessary because we have the Proceeds of Crime Act; but the Proceeds of Crime Act is regarded as inadequate by the key facts document that the Government themselves published just a year ago. It says that reforming the Act will be difficult and will require careful consideration. Well, it is now 21 years later. Can the Minister update us on how that is going and what has taken place?

Amendment 93 seeks to probe for information on the numbers of unexplained wealth orders, why they have not been used very much and what the actual figures are now. Given that we do not have a report, the Committee needs to have the facts in front of it. The amendment also seeks to understand the impact. Often, when we hear about unexplained wealth orders recovering money et cetera, we think about big criminals, money and investors. The amendment seeks to understand what is happening with respect to unexplained wealth orders in the cases of the different groups of people that it lists. It is clearly probing the Government, asking what the impact has been for

“older people … people living with disabilities … people who use adult social care … adults who lack mental capacity”.

Do the Government have any understanding of whether any recovery action taken under the Proceeds of Crime Act, or through unexplained wealth orders or other measures, has come about as a result of fraud against some of the categories that I have just listed? These are vulnerable people; they deserve our support. It will be interesting to understand how the legislation deals not only with big corporate fraud, kleptocrats and so forth but with some of the people who many of us meet who have been the victims of fraud. We would want to do all we can to protect them.

Having made those brief remarks, I will be interested to hear the comments of other noble Lords and the response of the Minister. I beg to move.

[Lord Young of Cookham (Con)]

My Lords, I shall speak briefly to Amendments 93 and 95. Amendment 95, in the names of the noble Lord, Lord Faulks, and my noble and learned friend Lord Garnier—who, sadly, cannot be here—is closely related to Amendment 93 but has a key difference in that subsection (3) of the proposed new clause says that the annual report must detail how much money has been brought in and how much has been spent in securing it.

UWOs were introduced by the Criminal Finances Act 2017. At the time, I was Treasury spokesman in your Lordships’ House. I have no recollections of piloting this legislation through, but I have some memories of some of the statutory instruments that flowed from it. The background was that this had been tried in other countries with varying degrees of success. I do not think anyone can argue with the principle: an individual has at his or her disposal substantial sums of money for which there is no reasonable explanation—they may be an official working for, or who used to work for, some totalitarian Government, whose official salary in no way could support their standard of living. I see the case for UWOs but, as we just heard from the noble Lord, Lord Coaker, they have not been a stunning success.

When the Bill was going through, the noble Lord, Lord Faulks, tabled some amendments to give the SFO more powers but also to understand the ambition of the Home Office with that legislation. A Home Office assessment in 2017 predicted that there would be about 20 UWO applications per annum. We just heard from the noble Lord, Lord Coaker, that, to date, there have been nine applications against four individuals, with not a lot of money realised. In fact, in one case, the cost of failure against the Aliyev family was about £1.5 million. Since then, we have a cap on the costs that can be awarded against the SFO or the prosecuting authority, but I wonder whether that goes far enough and whether we should not provide that there should be no order for costs against the SFO unless the proceedings were brought maliciously or without any reasonable justification. That would place a burden on the person against whom the UWO was claimed to show, in effect, that the institution of proceedings was abusive.

Related to this, last year the register of overseas entities was introduced, following the invasion of Ukraine. A Joint Committee, chaired by the noble Lord, Lord Faulks, looked into the register of overseas entities and to what extent it could relate to the UWOs. Can my noble friend the Minister update us on that? The register should provide some valuable information in seeking an UWO, and a failure to provide relevant details, or the provision of inadequate details, would clearly be of immense value.

However, at the heart of the problem is something that the noble Lord, Lord Browne, referred to in a previous debate: the inequality of arms in the firepower available to each side. The targets, by definition, will be well resourced, and the SFO considerably less so. This is not the first time in our debates on this Bill that we have emphasised the importance of resources in the fight against economic crime.

My final point is this: we have had two Bills in quick succession on economic crime, and I think we can now expect a legislative silence in this area while Governments of whatever complexion concentrate on other issues. Hence the importance of a provision to keep the Government up to the mark in telling Parliament how they are using the valuable powers that Parliament gave them with the UWOs. That, in effect, is what these two amendments seek to do.

[Lord Trevethin and Oaksey (CB)]

My Lords, having spoken briefly to the noble and learned Lord, Lord Garnier, who regrets that he is not able to speak to his amendment, I think I know broadly what he would have said, and I agree with him. I shall try to articulate it briefly.

The point made by the noble Lord, Lord Cookham, about inequality of arms in this area, is critical. It is very strange and troubling that there have been so few applications of this nature since the jurisdiction came into existence, and the reason, unquestionably, is that the SFO, which is responsible for deciding whether to make these applications, is understandably very wary of the cost consequences of losing.

As the noble Lord, Lord Young, said, by definition, the respondents to these applications will be well resourced. They will retain City firms whose partners charge £600, £700 or £800 an hour or more—and, in responding to the applications, which will tend to raise quite tricky points of fact and complex issues of foreign law, they will swiftly run up legal bills that extend to hundreds of thousands, even millions, of pounds. If the principle that the loser pays applies to these applications without qualification, the cost consequences of losing, from the point of view of the regulator or prosecutor, will be a considerable deterrent to making applications, even when there is obviously a good reason to do so.

The points that I am considering in these short remarks may come into focus later on this afternoon when we discuss another amendment. The reason for me making them now is that it seems to me that the information that would be yielded by the amendment in the names of the noble Lord, Lord Faulks, and the noble and learned Lord, Lord Garnier, would be of great value both to Parliament and to those who make decisions in this area in deciding how the regime needs to be restructured so that applications are made when they should be made.

[Lord Fox (LD)]

My Lords, I will speak briefly because we have heard some excellent speeches from the noble Lords opposite.

I just want to say, observationally, that we have debated a number of different groups where inequality of arms has been at the centre. When we talked about SLAPPs, we talked about inequality of resources. We have just talked about whistleblowing, where it is the same issue, and here we are again. In a sense, the Government are in different places with different elements of this. We need to have some sort of integrated response on how all people can be equal before the law because they can afford to do it—in other words, they can afford not to win, which is the issue here. We have our law enforcement agencies, we have perfectly innocent people going about their businesses trying to blow a whistle, and we have people who are trying to report issues publicly but are being SLAPPed. All of these important elements are being blocked through the inequality in access to the courts.

To refer back to this group of amendments, it seems to me that, if this amendment is not the answer, there must be some other answer. I look forward to the response from the noble Lord, Lord Sharpe, because it is quite clear that unexplained wealth orders have failed to deliver on whatever promise they may have had. Perhaps the Minister can explain how many of them there have been and what exactly the barrier has been, as well as what the cost per prosecution would be; that is an interesting point of view.

In the end, this is about inequality of arms. The first point here is that the Government must recognise that this is an issue; they then have to settle down and find ways of working with people who understand the law in order to eliminate that inequality. Otherwise, most of what we are talking about here will not happen.

[Lord Leigh of Hurley (Con)]

My Lords, I am prompted to rise by the words of the noble Lord, Lord Trevethin and Oaksey. I think he was referring to Amendment 106C, which we will come on to later this afternoon and which would extend the costs cap beyond UWOs. In the certainty that my noble friend the Minister will seek to ensure that Amendment 106C is agreed to, let me simply say that the amendment we are debating now, in the names of the noble Lord, Lord Faulks, and my noble and learned friend Lord Garnier, would be complementary and extremely helpful to Amendment 106C.

[The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)]

My Lords, I thank noble Lords for proposing their amendments. I thank the noble Lord, Lord Coaker, for moving Amendment 93 on behalf of the noble Lord, Lord Hunt of Kings Heath. I also thank the noble Lord, Lord Faulks, for Amendment 95, which was spoken to by my noble friend Lord Young. Both amendments relate to reports connected with unexplained wealth orders, henceforth known as UWOs.

I turn first to Amendment 93, which would require the Government to lay annual reports on UWOs where the property has been obtained through economic crime and taken from vulnerable adults. Economic crimes not only result in financial gain for criminals but leave a trail of suffering. They inflict financial and personal loss, including on the most vulnerable members of our society, which this amendment importantly recognises.

17:15

Protecting victims is a key component of the Government’s economic crime agenda. That is why we are providing £30 million to the City of London Police over the next three years to: improve the support services and reporting tools for victims; provide greater intelligence and insight to policing for investigations; and to expand the Action Fraud National Economic Crime Victim Care Unit. As part of the new Action Fraud work, better victim data will be provided to police forces to help them safeguard and provide bespoke prevention and protect advice to victims.

However, this amendment will not result in the outcome the noble Lord is aiming for. UWOs are investigative tools used to gather information relating to property suspected to be purchased with the proceeds of crime. The information which may be requested as part of the UWO process relates specifically to the interest of that individual or company in the property, and the legitimacy of it.

In answer to the questions from the noble Lord, Lord Coaker, about why UWOs have been used infrequently since their introduction in 2017, they are only one of a number of tools in the arsenal to investigate and recover the proceeds of crime and are used where there is not already enough information to proceed with civil recovery. They should not be viewed in isolation.

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. In addition, more than £979 million-worth of assets were restrained, frozen or seized in the course of investigations under POCA—I will come back to that in a second—in 2020-21. This includes £614 million restrained through restraint orders, £124.4 million of cash seizures, £99 million of bank accounts frozen using AFOs and £2.6 million of listed assets seizures.

In terms of the numbers, UWOs have been granted in four cases since their introduction in relation to assets with a combined value of £143 million. In October 2020, property worth an estimated £10 million was recovered following the use of an UWO, and they have been applied for in two further investigations.

In answer to the noble Lord, Lord Coaker, about why there has been no reform of POCA for 21 years, in fact there has been. In 2017, the Government significantly reformed and updated the Proceeds of Crime Act by way of the Criminal Finances Act. That Act introduced UWOs, account freezing and forfeiture powers, among other things. AFOs are some of our most valuable powers to date. Prior to that, POCA was reformed in 2009 and 2015. Of course, it is necessary to periodically update these powers to ensure that we keep apace with the criminals and their changing methods.

The amendment will not provide the dataset it seeks and it is not clear how the information that it seeks to obtain would enhance our efforts to improve the experience of victims of crime. Data is already collected on the demographics of victims of crime through the Crime Survey for England and Wales, which would provide a more complete dataset to assist policy development and scrutiny. Existing reporting systems will be able to provide fuller datasets than could be obtained using the UWO framework. I therefore ask the noble Lord to withdraw that amendment.

Amendment 95, which, as I said earlier, was spoken to by my noble friend Lord Young, seeks to require annual reports on UWOs that detail the costs, the value and the nature of the assets subsequently recovered, and the cost of the proceedings. The Government agree with the need to be transparent on the use of UWOs. A measure was introduced in the Economic Crime (Transparency and Enforcement) Act to lay before Parliament annual reports on the number of UWOs that were applied for and obtained each year. The first of those reports will be laid in September.

The additional information requested by this amendment is somewhat different. It should be borne in mind that the agencies that apply for UWOs act independently from government. The costs involved in obtaining a UWO depend on a complex range of factors and operational decision-making: for instance, whether the UWO requires international conversations with overseas partners. The scope to make these decisions freely is important for maintaining operational independence. The Government are committed to recovering more assets from criminals year on year, regardless of whether UWOs are the preferred tool of investigation. The measures in this very Bill will ensure that agencies have as comprehensive a toolkit as possible to support that objective.

It is important to note, as I said earlier, that UWOs are a powerful tool of investigation, but they are just one of a range of powers available to law enforcement agencies to support asset recovery investigations. I have already referred to the £979 million-worth of assets that were restrained, frozen or seized in the course of investigations under POCA in 2020-21.

In addition to the UWO report that I have mentioned, the next iteration of the Asset Recovery Statistical Bulletin will be published on 1 September. This will provide transparency on the use of the full suite of powers at agencies’ disposal. I hope that provides reassurance to the noble Lords, Lord Coaker and Lord Faulks, and my noble friend Lord Young, and I therefore kindly ask them not to press their amendment.

[Lord Fox (LD)]

The Minister set out some interesting statistics. It is clear that UWOs have been accountable for a very small proportion of the total amount of money recovered. The Minister referred to them as a powerful tool. Is he satisfied that UWOs are reaching their potential, in which case we would conclude that they are relatively insignificant compared to the other tools in the hands of enforcement, or are UWOs failing to meet their potential and not as powerful as they could be? Clearly, they are not generating very much money compared to all the other tools available to the enforcement agencies.

[Lord Sharpe of Epsom (Con)]

I am not sure that the question is entirely valid with regard to generating money. The fact is that, since their introduction in 2017, four of these have been issued in relation to assets with a combined value of £143 million. In October 2020, property worth an estimated £10 million was recovered, following the use of a UWO, as I have already said. As for whether the scheme is succeeding or failing, it is not for me to say. I am unable to do so, because I do not have access to the operational decision-making that goes into issuing them, and so on. These are operational matters.

[Lord Fox (LD)]

I accept that it is not for the Minister to say; who does say whether they are succeeding or failing?

[Lord Sharpe of Epsom (Con)]

I have already said that we will publish a number of reports on this on 1 September, so I would hope for some more clarity then, but I shall endeavour to find out more information and report back to the noble Lord.

[Lord Leigh of Hurley (Con)]

I share the disappointment expressed by other noble Lords. When UWOs first came out, I was very pleased to see them. They are a classic accountancy tool to establish what is going on in respect of an individual who may have accumulated wealth in an unexplained way. It is incredibly disappointing to learn that so few have been issued with, frankly, teeny sums of money, given the nature of the world that we are discussing. Can my noble friend take back our concerns to his colleagues and, in particular, ask whether targets could be set for the coming year on the number of UWOs that might be issued and the amount of funds that they might realise?

[Lord Sharpe of Epsom (Con)]

I am certainly happy to take my noble friend’s concerns back but, as regards targets, that would invite me to stray into operational matters, which I will not do.

[Lord Coaker (Lab)]

I thank the Minister for his reply, although I also share that disappointment. I should have thought that the focus of the noble Lord, Lord Young, speaking on behalf of the noble Lord, Lord Faulks, and the noble and learned Lord, Lord Garnier—as I am speaking on behalf of my noble friend Lord Hunt—was to ask the Government to bring a report, even if that is not the appropriate way of doing it, and say to them that the operation of UWOs is simply not working as they expected. It is perfectly reasonable for a Minister of the Crown, while of course not interfering with the operational independence of the police or any other law enforcement agency, to look at the legislation and see whether it is working as the Government expected. Clearly, it is not, so it would be a perfectly reasonable response to say that nine applications, four cases and the odd bit since is simply not what anybody would have thought acceptable or thought would happen.

This happens with legislation; even if we had the Government of our dreams, laws would be passed that did not function or operate in the way we would want—but that is the purpose of Committees such as this. This is where, to be frank, Ministers listen to what is said and respond that they will take the matter back and that it is unacceptable, rather than come off saying that it is one tool in the box of government in dealing with the issue.

The Minister had a pop at me. I was only using the facts that are available in a government document called Fact Sheet: Unexplained Wealth Order Reforms. If the facts I am giving the Minister are wrong then, frankly, the Government should have updated the facts, because this is what all of us use in these debates. I have not made it up—I have read the Government’s material. The Minister then turns around and says that the noble Lord, Lord Coaker, has not got it right, because the up-to-date figures are X, Y and Z against POCA. It might have been helpful to have the key facts.

Again, I read out,

“the Proceeds of Crime Act 2002 is a complex and technical Act and reform requires careful consideration and consultation”.

Then the Minister had a go at me and laid out four Acts of Parliament that have been done since. Why were they not included in the key facts? It would have been helpful to everyone to understand the way in which it had been reformed to see whether it is now working and functioning as the Government want it to. I do not have five floors of civil servants providing me with a brief that says there are four pieces of legislation which have updated and improved it. The serious point is that, when I and other members of the Committee depend on the government document setting out the key facts in relation to what we are discussing, it should be up to date. That is the only point I want to make.

I do not know whether the figure that I was going to use is out of date. A number of members of the Committee made the point to the Minister that, if it is hundreds of millions that have been recovered over a number of year, that is peanuts. The reason I say it is peanuts—the Minister will correct me if I have got this wrong—is that Fact Sheet: Unexplained Wealth Order Reforms says under the heading “Key Facts”

“Serious and organised crimes … for example”—


and lays out various things—

“are estimated to cost the UK economy £37 billion per year”.

That is not my figure. The key facts document published by His Majesty’s Government says it is £37 billion a year. I should have thought that the response to what are clearly probing amendments about reports would be, “It is £37 billion a year, we are getting a few hundred million there, we are getting £100 million there, £50 million there”. Why are we not making more of a dent into what we all, including the Minister, regard as simply and utterly unacceptable? The Minister will think it is unacceptable that we have that.

Of course, I shall not move the amendments, but I hope the Minister will take back the bureaucratic point about ensuring that the key facts documents that we use in our deliberations are updated. I hope that he will also talk about the point that unexplained wealth orders were brought in as a way for the Government to address the problem, which the noble Lord, Lord Young, and others mentioned, that huge sums of money surround individuals who have no legal way of explaining how on earth they got them.

I shall raise one other point, because it drove me mad when I was a Member of Parliament and before that a local councillor. On estate after estate, on housing area after housing area, it drove people who went to work mad to look down the road and see somebody who did not go to work driving a Ferrari, or something like that. At an individual level, that is exactly what all of us feel more generally about what is happening nationally and internationally, where people are playing the system. The vast majority of law-abiding business men and women and businesses conform to the law, pay their taxes and do their best—but £37 billion a year is lost to fraud. In answer to the noble Lords, Lord Fox and Lord Young, and me, the Minister talked about getting £10 million here and £100 million there. I am pleased that we got that, but it is peanuts compared to the amount of money that we are talking about. I hope the Minister can take that back—

[Lord Sharpe of Epsom (Con)]

As the noble Lord has drawn on the key facts document, it is important for me to provide a bit of clarification. It was published on 4 March 2022 for the previous Bill, not this Bill. Those numbers were correct at the time of publication. On UWOs, they have been applied for—I have said how many times—and two of the applications have been made since the Government reformed the UWO regime last week, which I should have said while I was answering noble Lords. Perhaps that provides a bit more clarity. On the key facts, the three floors of civil servants are in the clear.

17:30

[Lord Coaker (Lab)]

On the various facts that the Minister has brought forward, I just went to the latest fact sheets. For example, I have an overarching fact sheet for the Economic Crime and Corporate Transparency Bill. It was updated on 11 April 2023. If that one can be updated, this one can. Are we going to play at dates? All I do is go to the latest available fact sheet. I have another one here, which I shall use in our next debate—and I hope that that was updated on 11 April 2023. So the fact sheet that I cited was from 4 March 2022; I understand what the Minister said. However, these are the latest facts that I have used. What is a member of the Committee supposed to use, if they cannot use a fact sheet and cannot find the latest one? One assumes that it is the right fact sheet. It does not say, “Fact sheet: unexplained wealth order reforms as per a particular Bill”. Oh, I correct myself—it says that at the top. But the truth of this is that what all of us seek to do is to use facts, and all I did was to use the most up-to-date fact sheet. I hope that the one dated 11 April 2023 is the latest one and there is not one from 4 May 2023, which the Minister would be able to correct me about again.

I beg leave to withdraw the amendment.

Amendment 93 withdrawn.

Amendments 94 to 101 not moved.

Amendment 102

Moved by

[Lord Fox]

102: After Clause 187, insert the following new Clause—
“Home Office review of the Tier 1 (Investor) visa scheme: publication
Within a day of the day on which this Act is passed, the Secretary of State must publish in full the findings of the Home Office review of the Tier 1 (Investor) visa scheme which relate to economic crime.”Member’s explanatory statement
This amendment would require the Home Office to publish findings of their review of the Tier 1 (Investor) visa scheme.

[Lord Fox (LD)]

My Lords, this is a mixed set of amendments. I do not think that we will debate the philosophy of what a fact is, although we may come back to that in a few minutes. I rise to move Amendment 102 on behalf of my noble friend Lord Wallace and to speak to both an amendment in my name and a series of amendments in the name of the noble Lord, Lord Coaker.

Amendment 102 refers to tier 1 investor visas, otherwise known as golden visas. As I am sure the Minister will jump up and tell me, the scheme was closed relatively recently, but that is not the point of this amendment. We know that the scheme allowed individuals with a high net worth into the UK through the investment of large sums. We also know that, during its operation, it became increasingly clear that there was abuse, or the possibility of abuse. Visa beneficiaries under the scheme largely came from Russia, former USSR states and China, more so than from any other third country. It must have been clear to the Home Office and others that the sources of the wealth of many of these applicants were dubious at best.

The scheme was closed in February 2022. When it closed, the Government promised a review into so-called golden visas, because they were clearly an issue and something that needed to be reviewed so that we could find out what went wrong and ensure that future decisions did not make similar mistakes. It was, therefore, an object of some despair when, instead of publishing the findings of the review in full, the Home Secretary published a Written Statement in January this year with a summary of the review’s findings. The Statement told us what we already knew, in fact, but not much more. The scheme had been used by individuals who were, to quote the Statement,

“at high risk of having obtained wealth through corruption or other illicit financial activity, and/or being engaged in serious and organised crime”.

It also told us that this concerned a

“small minority of individuals”

who had obtained visas under the tier 1 investor route but gave no indication of the actual figures on where a risk had been identified. More than 6,000 visa holders were reviewed. What is a “small minority” of 6,000? How many were at risk?

We also know that 10 oligarchs who had been sanctioned as part of the response to Russian aggression in Ukraine used this scheme. How many more applicants with ties to Putin have been given visas that allowed them to embed themselves in the UK economy and UK society? Are any still in the UK? If so, have they gone through the process of acquiring citizenship? The Statement answered none of these questions.

This amendment would require the findings of the review, where they relate to economic crime, to be published in full. It is a review of a scheme that, according to the Home Office, attracted a disproportionate number of applicants from the countries identified as being particularly relevant to cross-border money-laundering risks faced and posed by the UK. As I said, the scheme benefited Russian and Chinese oligarchs above all. Key questions remain unanswered. Parliament needs to know what went wrong so that we can hold the Government to account in future. We are entitled to know more about what the Home Office conducted in this review and the impetus that it gave to various other elements of what we are seeing now. In other words, has anything learned from the review seen its way into the legislation that we are now talking about? If not, why not?

The refusal to publish either this report or the fuller details of Russian penetration into British politics, which the ISC recommended should be published, makes it difficult not to conclude that the Conservative Government have some significant and embarrassing issues to hide, most probably around donations to the party. If the Minister has nothing to hide, I am sure that he will be able to announce the publication of these reports.

As I said, I also want to speak to Amendment 104 in my name, which has, to some extent, a similar motive to the three amendments proposed by the noble Lord, Lord Coaker. Without putting words in the noble Lord’s mouth, I suspect that, like me, he is an enforcement sceptic. He is sceptical not about the need for enforcement but that sufficient enforcement will support the legislation we have spent all this time debating. My amendment is one way of trying to expose the resources and the effect that they are having. I am sure that the Minister will step forward and tell us that the NCA publishes an annual plan but Amendment 104, particularly subsection (3) of its proposed new clause, sets out a rather different set of things that we would need to know but which are not currently included in the annual plan published by the NCA.

I am quite happy to support other ways of doing this, which the noble Lord, Lord Coaker, is probing, but, at the heart of this, Parliament needs to know how effective enforcement is and that the primary agency running the enforcement process has the resources it needs in order to meet the challenges that it faces. Those challenges are getting bigger, harder and more sophisticated every day. This is one way of exposing whether the resources are sufficient and what Parliament needs to worry about in future in terms of delivering support to agencies so that they can actually enforce these things. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have attached my name to Amendment 102 in the name of the noble Lord, Lord Wallace of Saltaire. I begin by quoting the noble Lord, Lord Evans of Weardale, who chairs of the Committee on Standards in Public Life. Speaking in this Room last year, he said that

“we have clearly, as a matter of policy, turned a blind eye to the perpetrators of corruption overseas using London for business or leisure purposes”.—[Official Report, 13/10/22; col. GC 156.]

The golden visa scheme was clearly a significant part of that issue, as highlighted by the noble Lord.

I begin by paying great tribute to the noble Lord, Lord Wallace of Saltaire, who has been an absolute terrier—no, that sounds too small. A bulldog is better.

[A noble Lord]

A Yorkshire terrier.

[Baroness Bennett of Manor Castle (GP)]

We will not get into that one. The noble Lord, Lord Wallace, has been an absolute bulldog in pursuing this issue over a number of years. The reason why I chose to attach my name to this amendment is that I worked with the noble Lord on this issue, during my modest role in what became the Financial Services Act 2021. As the noble Lord, Lord Fox, outlined so clearly, we must be able to diagnose the illness fully if we are to find the medicine we need to deal with it. At the moment, we are not being allowed to see that diagnosis; we are getting a very rough, top-line kind of summary.

As the noble Lord, Lord Fox, said, we know that more than half of the visas issued—some 6,000—were being reviewed in 2022 for possible national security risks. Being told about a small minority does not get us anywhere near where we need to go. We are looking at this particularly in the context of the Russian attack on Ukraine and the current geopolitical situation. More than 200 Russian millionaires bought their way into the UK in the seven years after the scheme was supposedly tightened, before it was finally closed. We have to look at that with respect to security issues as well; we are talking about economic crime here but economic crime and security are surely interrelated. We need to know about those issues.

This amendment deals only with the review relating to economic crime. I am sure that that is because the Bill Office said that anything broader would be out of scope—I have no doubt about that—but it is worth putting on the record that, to learn lessons for the future, we need to assess the impact of the scheme much more broadly. I do not know whether the Home Office report looked at this—I cannot see it—but it would be interesting to see what impact it has had on our current housing crisis and on house prices; surely it has had an impact.

It is also worth highlighting the broader impact of entrenching wealth-based and racialised inequality in the UK. Take the contrast between the 250 family members and dependents of the Russian millionaires who came in versus the fact that so many British people are unable to live in their own country with their foreign spouse or partner because they do not earn enough money to be able to do so. That contrast is really shocking; we should be looking at the impacts of that on our society. These golden visas were a disaster. We can only understand that disaster and seek to deal with its effects if we are open about the Government’s own report.

[Lord Coaker (Lab)]

My Lords, I support much of what the noble Baroness, Lady Bennett, and the noble Lord, Lord Fox, have said. In speaking to my amendments in this group, I start by welcoming the publication of the fraud strategy last week. I know that the Minister has been pushing for it to be published as speedily as possible; its publication is helpful to the Committee.

The fundamental question behind much of what I am going to say is this: how will the fraud strategy published last week answer some of the problems that have been raised—indeed, that I will raise? My Amendments 106B, 106EA and 106EB are clearly probing amendments but they have at their heart the question posed by the noble Lord, Lord Fox: how will the Government bring together all this legislation, statutory instruments, enforcement papers, reforms of Companies House and so on? How is all of that in the landscape of government being brought together, co-ordinated and made effective? It is not an easy question to answer but, looking at all these things, they seem cluttered, to say the least. Even with this Bill, things are cluttered. Some sort of review or report to Parliament to try to do something about that would be helpful. Does the fraud strategy do that? How will the strategy report to Parliament to see whether it has been successful or not?

17:45

As I say, Amendment 106B suggests an economic crime committee, and Amendment 106EA a report on the economic crime investigation and prosecution framework. I want to leave Amendment 106EB, on the reform of the Serious Fraud Office, to one side at the moment. Again, I used the factsheet—it is from 11 April 2023, the Committee will be pleased to know, being the most up-to-date one I could find on this. I read it because it talked about economic crime in the UK and the Government’s response to it. It says:

“The National Crime Agency … is the national agency that leads the response to serious and organised crime”.

Is the new unit that the fraud strategy is establishing all within the National Crime Agency, and how does that work? It goes on:

“The … National Economic Crime Centre … is a multi-agency centre that was established to deliver a step-change … The NECC brings together … the NCA, Serious Fraud Office … HM Revenue and Customs … Financial Conduct Authority … Crown Prosecution Service … the City of London Police … and police forces across England and Wales”.

How is that co-ordinated, and what does the fraud strategy have to say about that? Alongside that, the factsheet says that there are

“three statutory supervisors of anti-money laundering and counter-terrorist financing … the Financial Conduct Authority, HMRC, and the Gambling Commission. In addition, the Office for Professional Body for AML Supervision (OPBAS) is an oversight body for the legal and accountancy professional body supervisors”.

Your Lordships can see what I mean by it being cluttered, and that it is unclear who does what. In my experience of some of these things, if you are not careful, everyone is responsible but nobody is. Who holds the ring?

The Government themselves recognise that this is a problem because the factsheet says:

“The private sector organisations involved in our response to economic crime are even more diverse”—

those are the Government’s own words. Therefore they accept that the first group that I talked about was diverse but the private sector is “even more” diverse. The factsheet then goes on about how

“International standards … are set by the Financial Action Task Force”.

Again, I am not trying to be sarcastic; I am just saying that all this is a landscape within which the Bill will operate, so who will do what, and does the fraud strategy sort it out? I do not know.

I would have thought that the fraud strategy would have something to say about the current legislative framework. That is partly what my amendments are trying to get to—for example, Amendment 106EA, where I talk about the need for a report on the economic crime investigation and prosecution framework to assess all the various bodies involved. Noble Lords in the Committee may want to guess how many Acts the current legislative framework says deal with this area, according to this key facts document: eight Acts deal with all this legislation. I thought that the Economic Crime and Corporate Transparency Bill, or 2023 Act, as it will soon be, will no doubt co-ordinate some of this and reduce the number. In fact, from what I can see, it is number nine. I say that because number eight is the Economic Crime (Transparency and Enforcement) Act 2022.

The question is, how is all that brought together and made effective, and how does it work? Who holds what ring, who says who is doing what, and who says who is achieving what? The amendment that the noble Lord, Lord Fox, proposed, asks exactly the same question. It is not about trying to be cynical about the aim. We all support the Bill, but the Government need to get a grip of this, and does the fraud strategy do it? How will we in Parliament know whether the fraud strategy is doing it or not?

I wanted to mention the report on the Serious Fraud Office, which was included in this. I am not an expert on the Serious Fraud Office—I guess that other noble Lords in the Room will know more about it than me. However, I saw it as one of the major bodies responsible for delivering the points that the Government would want. Then I saw in the Financial Times of 9 April 2023 the headline:

“Collapse of Fraud Case Triggers Demand for Overhaul of UK Disclosure Rules”.

I shall not go through all that, but that article talks about the complete collapse of many high-profile cases that the Serious Fraud Office has brought to deal with fraudulent behaviour, and mentions Serco, G4S and others. I wonder: is the Serious Fraud Office working in a way which the Government are happy with, and if it is not, why are these articles wrong, what will the Government do about it, and does the fraud strategy sort that out?

Then I read another article, this one from the Institute of Economic Affairs. It was published on 28 March 2023 and is headed, “Serious Fraud Office rife with failure”. It involves an interesting former Justice Secretary, Sir Robert Buckland, saying that he

“calls for ‘urgent and thorough examination’ to prevent repeating SFO’s past mistakes”.

I want to highlight just a couple of headlines. The article states:

“The Serious Fraud Office is responsible for a series of expensive and high-profile failed prosecutions, unlawful prosecutions and breaches of the Civil Service code”.

Is the fraud strategy going to sort that out? It continues:

“The SFO’s long record of failure demonstrates the need for reform, which could include abolition and reallocating its powers to other government agencies”.

Are the Government thinking about that or has the report got it completely wrong? It goes on:

“The Serious Fraud Office has a history of unprofessional behaviour and spectacular prosecutorial failures. This is according to a new paper from the Institute of Economic Affairs”,

which is the one I have read. The article states:

“The SFO has failed to disclose potentially exculpatory evidence, mishandled documents, used unlawful search warrants, undertaken inadequate legal analysis, made spurious allegations, and, in one case, forged a letter”.

The Serious Fraud Office is not functioning well and is in need of serious reform. What are the Government doing about it?

These are serious points. I hope that, in responding to this debate, the Minister will give the Committee some reassurance about this cluttered landscape and what the fraud strategy will do about it. Also, just as importantly—my Amendment 106EB refers to this—what will the Government do to report on the performance of the Serious Fraud Office as it stands? Are all the reports wrong that say that it is dysfunctional? If they are wrong, where is the Government’s statement saying that they are all wrong? How will the fraud strategy sort this out? What on earth are the Government going to do about this?

I go back to what the noble Lord, Lord Fox, and other noble Lords have said all the way through the passage of this Bill. We basically support the Bill and want it to work, although there are improvements that need to happen. However, if the Bill has no teeth and no enforcement, and there is no way in which it will change the culture and deal with some of its seriously dysfunctional parts, it will not achieve what it wants. That is not what we want. Everyone in this Committee wants it to succeed, so I hope that the Minister will respond positively to my amendment and those in the names of the noble Lord, Lord Fox, and the noble Baroness, Lady Bennett.

[Lord Faulks (Non-Afl)]

I want briefly to add to that. I am sure that the Serious Fraud Office is full of capable and conscientious men and women who go about their jobs with enthusiasm. However, they are often pitted against rather formidable adversaries in terms of lawyers and the resources that are available to those lawyers to defend people who are the potential targets of the Serious Fraud Office.

It may be that one of the problems with the Serious Fraud Office is the career structure. The American equivalent often engages lawyers with very considerable abilities who are at a relatively stage in their practice. They may not be paid particularly well when they do it, but it is a feather in their cap. In other words, the Serious Fraud Office’s equivalent in America often has extremely high-quality lawyers. I wonder whether thought has been given to restructuring our whole approach to those who prosecute these matters so that we can somehow incentivise the very best people to get engaged in this business to render the playing field a lot more level than it currently is.

[Lord Agnew of Oulton (Con)]

My Lords, I rise to support the amendments tabled by the noble Lord, Lord Coaker, in particular Amendment 106B. He is becoming quite an expert on an area that has troubled me for 18 months or so.

The figure of £37 billion used in Amendment 95 is only a small part of the story. The National Audit Office talks about a separate £30 billion bottom-end estimate of losses to fraud in the public sector, so this is a huge issue; that is why I have tried to put as much effort into it as I can. The noble Lord, Lord Coaker, made the point that it is a hotchpotch landscape. There are 22 economic crime-fighting agencies scattered across the whole landscape. They do not join up or talk to each other. They have different remits and different legislation to use to effect any kind of outcome.

A report of the kind that the noble Lord suggests would bring real clarity to this. It would explain to people what is going on. It would not cost very much; indeed, as usual, it would save money because there is, I am sure, a great deal of duplication going on in the system. I urge my noble friend the Minister not to respond today, because it is so hard to respond on the hoof to these sorts of things, but to take this away and write to us to explain what is against the logic of a single reporting point once a year for all the agencies involved in economic crime.

[Lord Browne of Ladyton (Lab)]

My Lords, I am pleased to follow the noble Lord, Lord Agnew, in this part of our debates on the Bill because I recently corresponded with him about many of these issues. It was prompted by the publication on 30 March 2023 of the National Audit Office’s report, Tackling Fraud and Corruption Against Government. He helpfully drew my attention to some aspects of that and persuaded me that there is an opportunity in this Bill to take advantage of a degree of cross-party co-operation and leadership in an area of public policy, the like of which I have never seen in 25 years in the other place and your Lordships’ House.

The degree of informed cross-party leadership in the House of Commons is unique, in my experience. I do not think that I have ever seen so many well-informed people who have spent years working in this area leading together, in an utterly non-partisan way, the revision and improvement of a piece of legislation. It has been an utter pleasure to be able to contribute a small amount to your Lordships’ Committee and to listen to genuine experts in this Committee talking both about their experience and how it can be brought to bear to improve the Bill. I have no doubt that the Minister welcomes the fact that there is such support for the Government’s ambition.

However, my sense is that the government machinery resists being helped too much in relation to this legislation. I was an enthusiastic amateur in relation to the first part of the Bill because I have no expertise in the workings of the Companies Act. There were a number of people in the Committee who were able to inform me about how the process worked. The whole point of those debates on Companies House was to change culture; the whole point of this legislation seems to me to be to change culture in all aspects and areas that it touches in relation to economic crime. The culture that we want is one of transparency and accountability, which is why it is called the Economic Crime and Corporate Transparency Bill. It seems utterly ridiculous that the visa report is in the hands of the Home Secretary, who now has responsibility for a large part of the Government’s policy given the changes in government structure that took place not so long ago. She is holding on to an important report—a review of how we got into the position where this well-intentioned visa process became a machinery of deep corruption in our society at high levels because the money for corrupt purposes was moving quite significantly up the ladder of those who make decisions into the policy world.

What justification can there be, when the Home Office substantially has responsibility for a large part of this Economic Crime and Corporate Transparency Bill, which is designed fundamentally to change our approach, for one of the principal Ministers in charge of this area of law to be sitting on this report without explanation? There is no explanation. We are entitled to conclude that there must be something that she does not want the light of transparency to reveal. The noble Lord, Lord Fox, has already suggested what that could be—it probably is that.

18:00

I intend, between now and the publication of the Labour manifesto, to ensure that there is a commitment to publish this—if we come into government—in that manifesto and that we will have, whatever rules there may be in government, a manifesto justification at the election for publishing it. If I can have my way and persuade the leadership of my party, we will have it. It should be published now so that we see the worst of it and see exactly what damage economic crime and corruption can do to the structures of our society.

I will make my second point as quickly as possible; I do not like to take up too much time. I cannot understand how the Home Office managed to put together a proper fraud strategy, given the report published by the National Audit Office on 15 November last year, Progress Combatting Fraud. It revealed that the Home Office had an incomplete and out-of-date grasp of the cost of fraud and a poor understanding of who committed the crime; and that the Government were using data and prices from six years ago to establish their understanding and had no reliable estimate of the cost of fraud to business or how much was being spent on tackling the crime.

I was astonished, when the National Audit Office published that report, that the communications officer of the Home Office responded by saying that these issues would be dealt with in the fraud strategy. Fundamentally, the Home Office was not in a position to publish a fraud strategy if its data was six years old. If the Home Office has managed to get up-to-date data in all these areas in the few months since November, this fraud strategy will have some basic value. If it has not, what are we to make of a fraud strategy informed by data that is, at best, six years old, especially when even that was incomplete?

That is probably echoed in every other aspect of the many organisations that we rely on to combat this crime and behaviour. It is likely that they all have incomplete data. Despite improvements in the infrastructure of government, there is no proper co-ordinated view of how it can all work together both to prevent the continuation of the level of economic crime being perpetrated on our society and to improve our ability to make those who have been responsible for it, or will be responsible for it in future, properly accountable.

It is all very well saying—I suspect the Minister will say this because I have been in his position in the past and said these sorts of things—that these organisations are all accountable to Ministers and that the proper way to have accountability to Parliament is for the Minister, the appropriate Secretary of State or the Government to report to Parliament. But here is an opportunity to use Parliament in the same way as, we hope, the Climate Change Committee works for the Government in relation to climate change: to use Parliament with its enthusiasm, informed membership, cross-party leadership, non-partisan approach and desire to solve this problem once and for all by creating an infrastructure that prevents us ever being subject to this level of criminality again. The Government should take what is being offered by this current Parliament, including for future Governments: the opportunity to be the accountability mechanism and drive back into these various organisations what Parliament wants from them. It is what Parliament wants from them that will change the culture and the way in which these issues are approached in Companies House, or wherever else it needs to happen.

That is why I support these amendments that my noble friend Lord Coaker has tabled and ably explained. I hope that the Government will engage with these and other aspects of the Bill, with the strong, cross-party power that they have in Parliament, to make the Bill work as they want it to and protect our country from the £300 billion a year—I think—that we are losing to economic crime.

[Lord Leigh of Hurley (Con)]

My Lords, I rise briefly to urge the Minister to not allow the concept of a tier 1 investor visa scheme to be rubbished. This country has benefited enormously from foreign direct investment. I have seen a large number of UK small and medium-sized businesses benefiting from individuals coming to and living in the UK and putting money into and running the businesses, and those businesses flourishing thereafter. It is an important part of what we offer overseas investors, if done correctly.

I am a little disappointed that the noble Lord, Lord Fox, seemed to imply—and probably stated it; I may have missed it—that the reason that this information has not been published is that the Home Secretary is worried about disclosure of people who may have made donations to the Conservative Party. I do not think that is in the spirit of the debate; I do not think it is correct. The noble Lord laughs, but it is particularly surprising from the Lib Dems, which took money from Michael Brown, to make allegations like that, and it is a shame because I think there is great consensus in the Committee about the purpose and merits of the Bill.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank all noble Lords, who have made some extremely thought-provoking points in this debate. I will do my best to address them all.

Scrutinising the activity of government is obviously a key function of Parliament, and of course the Government are entirely supportive of it. I reassure the noble Lord, Lord Browne, that this particular part of the government machinery is always grateful for any help that is offered and will receive it in that spirit. However, the amendments in this group are unnecessary, as they are duplicative of existing reporting arrangements and scrutiny structures.

On investor visas, I take my noble friend Lord Leigh’s points. If done in the right way, they are potentially an important engine of economic growth—that should be acknowledged. Of course, we should not forget that they were introduced by a Labour Government and maintained during the coalition years. However, on Amendment 102, tabled by the noble Lord, Lord Wallace of Saltaire, and moved by the noble Lord, Lord Fox, I am aware that there are concerns about how the now-closed tier 1 investor route operated—in particular, that it was used by those relying on funds that had been illegitimately acquired and those who may have posed a wider risk to the UK’s national security.

It was because of those concerns that the Government committed in the first place to the review of the visas issued under the route between 2008 and 2015. As has been acknowledged, the Home Secretary made a Written Ministerial Statement on 12 January setting out the findings of that review. This included that the review had identified a minority of individuals connected to the tier 1 investor visa route who were potentially at high risk of having obtained wealth through corruption or other illicit financial activity or being engaged in serious and organised crime. The Statement of 12 January represents the Government’s substantive response to the commitment to undertake a review and publish its findings, including its findings in respect of economic crime.

Obviously, there was a delay; we are aware that considerable time elapsed between the commissioning of the review and the setting out of those findings. However, delay is regrettable but not unreasonable when issues of national security are at stake. Let me expand on that a little, if I may. It would have been preferable had the review been able to include more information about specific individuals but we have had to act sensibly and responsibly with regard to the UK’s national security; this includes striking the right balance between setting out the review’s broad findings and observing the constraints on disclosing sensitive details, which must be withheld, at the request of our operational partners, to protect our border and the vital work of our law enforcement agencies.

The noble Lord, Lord Fox, raised the subject of party-political donations. Without getting into a slanging match on this subject, I think it is worth restating that UK electoral law already sets out a stringent regime of spending and donation controls that prioritise transparency and safeguard the integrity of our elections. All political parties recognise that third-party campaigners and candidates must record their election spending and report it to either the Electoral Commission or their local returning officer. This information is all publicly available. The measures in the Elections Act 2022 also updated the political finance regulatory framework by increasing transparency and fairness and strengthening the controls against ineligible foreign spending on electoral campaigning. That is a fairly comprehensive transparency regime concerning the funding of political parties.

The House has considered similar amendments to other legislation, most recently during the passage of the National Security Bill. As before, the Government’s view is that this amendment is not necessary. The Government have set out the key findings of the review of the operation of this route and have acted to close it. I therefore ask the noble Lord, Lord Fox, to withdraw the amendment.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister suggested that it was the inability to identify individuals that meant that some aspects of the report could not be released. I think that everyone understands the retraction of names where necessary, but surely that would not prevent the release of absolute figures rather than a summary of the figures.

[Lord Sharpe of Epsom (Con)]

As I said, it was also to do with the disclosure of sensitive details related to operational partners—the sorts of things that protect our border and the work of law enforcement agencies.

I thank the noble Lord, Lord Fox, for tabling Amendment 104, to which I will now speak. The impact of fraud and economic crime affects the whole of our society. The cost of fraud to the UK runs into the billions and is assessed by the National Crime Agency to be the most common crime type in England and Wales. We take this threat type seriously and have delivered a strengthened approach to reduce its impact. Obviously, as I referenced, the fraud strategy is one part of that; I will come back to it in a moment. The NCA currently leads the national response to serious and organised crime, including economic crime. As predicted, the NCA’s director-general is accountable to the Home Secretary and, through the Home Secretary, to Parliament.

The agency already publishes an annual plan and an annual report. The annual plan sets out how it intends to exercise its functions in co-ordinating the operational response to serious and organised crime, having regard to the Home Secretary’s strategic priorities and the director-general’s operational priorities. The annual report details its performance over the previous financial year, including efforts to tackle economic crime. The NCA also reports annually on the impact of suspicious activity reports in tackling economic crime and, as I set out earlier in response to Amendments 93 and 95 in the previous group, in respect of UWOs. Given this current reporting and the potential for duplication, the Government do not believe that this amendment is required at this time, so I ask the noble Lord, Lord Fox, not to press it.

I thank the noble Lord, Lord Coaker, for his Amendment 106B. Before I get into the amendment itself, let me say that I take the noble Lord’s points about the diversity of response to the sorts of crime that are being discussed. Of course, that partly reflects the diversity of the crimes being investigated, as he will be aware. The fact is that this is a fast-moving, rapidly evolving space; there is no doubt that the operational response to it reflects that particular set of circumstances.

18:15

However, the fraud strategy—I have a copy of it here—does make very strenuous inroads into addressing the various points that noble Lords have made. I refer to page 16 onwards, with regards to the various agencies and responses. Also, there was an all-Peers drop-in session earlier where we summarised the various pieces of legislation currently going through the House with a view to how they all fit together; I would be happy to forward that on to any noble Lords who might be interested.

To go back to the specific amendment, the creation of parliamentary committees is the responsibility of the House authorities, not the Government, so it would be unworkable for an amendment to make it a statutory requirement for the Secretary of State to set up such a committee. My noble friend Lord Agnew asked me to write on this subject, which I am happy to do.

I will come back to the comments from the noble Lord, Lord Faulks, about staffing and career strategy with regards to the SFO, but I hope I can reassure noble Lords that there is already a great deal of parliamentary scrutiny of the economic crime agenda. The Treasury, Justice and Foreign Affairs Select Committees have all recently published reports in this area. The Government look carefully at the work and publications of these committees and issue comprehensive responses to their reports.

The Government, regulators and law enforcement already regularly give evidence to parliamentary committees. This includes information at a higher classification to the Intelligence and Security Committee. Furthermore, as already mentioned, the National Crime Agency is required under the Crime and Courts Act to publish an annual report and lay it before Parliament, further adding to the available scrutiny of operational bodies.

There is a well-established government structure that oversees the response to economic crime across the system, thereby ensuring effective oversight of both enforcement and supervision agencies. This is co-ordinated by regular departmental and private public forums, most notably through the Economic Crime Strategic Board, which is co-chaired by the Chancellor and the Home Secretary. So, I hope that the noble Lord, Lord Coaker is reassured—

[Lord Coaker (Lab)]

Does that committee do an annual report? How often does it meet?

[Lord Sharpe of Epsom (Con)]

I do not know. I will find out and write to the noble Lord. For now, I hope he will accept that it is not the role of the Government to set up parliamentary committees and so will not seek to press his amendment.

I turn now to Amendment 106EB concerning the Serious Fraud Office. Once again, I thank the noble Lord, Lord Coaker, for tabling this amendment, which would require the Government to lay in Parliament an annual report on the Serious Fraud Office. The effectiveness of the agencies tasked with fighting economic crime, including the SFO, is of critical importance and of interest to both Houses. That is why the SFO annual report and accounts—these set out much of the information in which the noble Lord is interested—are routinely laid in Parliament.

The law officers of England and Wales superintend the SFO. They oversee the performance of the SFO, including steps that they can take to improve that performance. Through the superintendence process, the law officers identified the need to expand the SFO’s pre-investigation powers, a change that appears in Clause 185 of this Bill. The law officers take steps to ensure transparency, including participating in Attorney-General’s Questions in the other place; publishing summaries of minutes from SFO ministerial strategic boards online; and addressing issues promptly through Written Ministerial Statements.

This is complemented by the work of HM Crown Prosecution Service Inspectorate, which inspects the SFO and publishes its findings alongside a set of recommendations. HMCPSI recently published an inspection of the SFO’s case progression—that is, the organisation’s ability to deliver its cases efficiently and effectively. Given our previous discussions, the tone of the debate and the views expressed, I understand that the intention of this amendment is to probe the Government on the resourcing of the SFO.

The noble Lord, Lord Faulks, made a very interesting point; he may have noticed that I wrote my note on the wrong page when I referred to it earlier. I am coming back to it now; it is an interesting idea and I will definitely take it back. There is a process in place to recruit a new director-general of the SFO. I would imagine that acute matters, human resources and future resources are a part of the remit for that person but the noble Lord certainly makes an interesting point. To go back to a conversation during a debate that the Lord, Lord Browne, and I had last week, my personal point of view is that it is about time we all sat down and started to think about recruitment in law enforcement more generally.

[Lord Agnew of Oulton (Con)]

Given that my noble friend the Minister is going to take the comments made by the noble Lord, Lord Faulks, on recruitment back, I encourage him to look at the report by Andrew Cayley KC, Chief Inspector of the Crown Prosecution Service, who has also done a report recently. Some of the problems in the SFO are case workers not being paid enough, churn and so on, which led to the collapse of the case against G4S. There is big piece of work there that we could be doing stuff with.

[Lord Coaker (Lab)]

What is the Government’s view on whether the SFO is working?

[Lord Sharpe of Epsom (Con)]

Those are good questions; I will come on to them.

Funding and resourcing is a subject that is covered in the fraud strategy. I will not go over the details. At the most recent spending review, the SFO received an uplift to its core budget that is supporting its operations. In addition, the SFO continues to have access to reserve funding to fund specific high-cost cases if needed. This enables the SFO to obtain additional funding for any case that exceeds 4% of the core vote funding for the year.

My noble friend Lord Agnew and the noble Lord, Lord Coaker, referred to the G4S case. Obviously, it is always disappointing when a case has to be brought to an end before it is concluded but, like other agencies, the SFO is right to end an investigation or prosecution when it is no longer in the public interest. The SFO has acknowledged that there were disclosure challenges in the case that was closed earlier this year, R v Morris, Preston and Jardine. The SFO has made good progress on implementing the disclosure changes recommended by Sir David Calvert-Smith and Brian Altman KC in their independent reviews, published last year. The Crown Prosecution Service Inspectorate, the agency that inspects the SFO, has been asked to expedite a planned review of SFO disclosure, which will provide further independent assurance of the SFO’s processes.

Further to that, in Economic Crime Plan 2, which was published on 30 March, the Government set out their intention to explore reforms to the disclosure system to ensure that it supports a fair criminal justice system because cases that are lost on procedural grounds are, as noble Lords have noted, a loss to victims, taxpayers and, of course, society.

The noble Lord, Lord Coaker, just asked me whether the Government have faith in the Serious Fraud Office. The answer is yes.

[Lord Coaker (Lab)]

Is it working?

[Lord Sharpe of Epsom (Con)]

I would say that it is the same thing; perhaps we can debate that as well.

The Serious Fraud Office investigates and prosecutes the most complex cases of fraud, bribery and corruption. That is a very challenging remit. It has delivered some outstanding outcomes. For example, last year, it secured the conviction of Glencore for bribery and corruption in five countries, with the company ordered to pay £280 million—the highest ever ordered in a corporate criminal conviction in the UK—as well as eight convictions for five cases of fraud and bribery worth more than £500 million. It consistently recovers some of the largest amounts of proceeds of crime, despite being a fraction of the size of many other national agencies.

It is also important to note the SFO’s role in fighting economic crime globally. In the last financial year, the SFO took steps to assist overseas jurisdictions in their investigations by working on more than 60 incoming money-laundering requests. I think that the statistics answer the question—yes, we have faith, and yes, it is working. I hope that my explanations have provided some reassurance. I therefore ask the noble Lord not to press his amendment.

I turn to the final amendment in this group, Amendment 106EA, again tabled by the noble Lord, Lord Coaker. I come to this amendment last as it seeks to bring into one amendment much of what the other amendments in this group also attempt. I will not repeat myself too much here, especially considering how long I have gone on so far. The amendment would require the Government to issue a report on the performance of agencies and departments in tackling economic crime. However, I can assure noble Lords that this is already being done. As I have mentioned, the Government, regulators and law enforcement already regularly give evidence to parliamentary committees. The National Crime Agency is required under the Crime and Courts Act to publish an annual report and lay it before Parliament, further adding to the available scrutiny of operational bodies. The Government already conduct a range of threat and risk assessments to develop our understanding of economic crime. The NCA’s national strategic assessment assesses the economic crime threats facing the UK on an annual basis. As required under the money-laundering regulations, the UK also conducts periodic national risk assessments of money laundering and terrorist financing, which provide an overview of the risks and likelihood of an activity occurring. We have already discussed in detail the establishment of a fund to tackle economic crime so I will not repeat that debate again.

Regarding the amendment’s calls for a strategy on tackling economic crime, this March, the Government published Economic Crime Plan 2. Through 43 actions, it sets out how the public and private sectors will work together to transform the UK’s response to economic crime. Obviously, the fraud strategy is a part of that overarching economic crime strategy.

As regards the quality of the data in the fraud strategy, which was referenced by the noble Lord, Lord Browne, I have just had a quick flick through and it is more recent than six years. I should also reassure the noble Lord that one of the commitments in the fraud strategy is to improve the quality and collection of data, so this can be regarded as a baseline.

There are numerous ways in which the Government report on their performance with regard to tackling economic crime. This amendment is duplicative of them and therefore unnecessary. I ask the noble Lord to withdraw his amendment.

[Lord Fox (LD)]

My Lords, we are indebted to the noble Lord, Lord Coaker, for his amendments because they have inspired an interesting debate. The Minister has made a spirited defence of the Government’s position on this issue, but the very fact that these questions are being asked—and by a lot of people, not just the people in this Room—indicates that there is a lot of work for the Government to do in order to placate, explain or perhaps improve what is going on out there. The key element, which was highlighted earlier, is the alphabet soup of different agencies all interlinking in what is going on. The Minister has made a big effort in trying to calm nerves but I do not think that those nerves are calmed. Although the amendments will undoubtedly be not be moved, there is work to do; hopefully, the Minister has got that message from the nature of this debate.

I refer back to Amendment 102. Clearly, it ruffled some feathers. I note that in 2022 it was the Conservative Government who saw fit to withdraw this scheme because they felt that there were serious issues. We know that of the 6,000 such issues, a minority were problematic, but we still do not know exactly how many. I want to address the point made by the noble Lord, Lord Leigh that there is some use to encourage inward investment. This scheme clearly went off the rails, but by publishing the report properly, we would know how to encourage it without causing the issues that the Government clearly felt were sufficient to close the scheme. I am comfortable that I was not overstating the problem. The problem was there and the Government identified it, but now we have an issue in that we do not know the full scope of the problem.

In his response on party finance, the Minister referred to national security. The fact that there are issues is well covered. The Minister should know—I am sure that he does—that amendments to the National Security Bill that sought to enhance the scrutiny of the source of political donations have been thrown out by the Commons, so some of the things that the Minister said are not strictly there. There is still an issue between this House and the Commons when it comes to the National Security Bill and party funding, and it remains ongoing. I think that was the issue that my noble friend was anxious to state.

On the subject of the report and the reference to party funding, I remind noble Lords that I said that it makes it difficult not to conclude that there are embarrassing issues to hide because the report was not published. If there is no problem, as I am sure noble Lords believe, there is no reason not to publish the report. It is the non-publishing of the report that causes suspicion. That is the point that I was trying to make.

With that, I beg leave to withdraw Amendment 102.

Amendment 102 withdrawn.

18:30

Amendment 103

Moved by

[Lord Oates]

103: After Clause 187, insert the following new Clause—
“International Anti-Corruption Court
(1) Within six months of the passing of this Act, the Secretary of State must seek to begin negotiations with international partners to establish an International Anti-Corruption Court (IACC).(2) It is to be the objective of the Secretary of State in the negotiations to secure that the IACC has the following purposes—(a) to hear cases of international economic corruption, and(b) to sentence persons to appropriate punishment for international economic corruption.(3) The Secretary of State must lay a report before each House of Parliament within a year of the passing of this Act on the progress of the negotiations.(4) In this section “international economic corruption” means offences which if committed in the United Kingdom would constitute an offence mentioned in paragraph 15 of Schedule 9.”

[Lord Oates (LD)]

My Lords, on behalf of the noble Lord, Lord Hain, who cannot be in the Committee today, I rise to move Amendment 103 in his name, my name and those of the noble Baronesses, Lady Wheatcroft and Lady Altmann. In doing so, I pay tribute to his tireless efforts in exposing corruption, particularly the key role he played in bringing the kleptocracy of former South African president Jacob Zuma to the world’s attention.

This amendment would require the UK Government to begin negotiations for the establishment of an international anti-corruption court, or IACC, within six months of the passing of this Bill. International corruption is estimated to cost $2 trillion, or 5% of global GDP, every year. In a 2021 report, the UN High-level Panel on International Financial Accountability, Transparency and Integrity calculated that as much as 2.7% of global GDP is laundered by criminals through illicit global financial flows. While these opaque transactions occur in all countries, they have a much heavier impact on low and middle-income countries. The Washington-based organisation Global Financial Integrity found in its most recent report that from 2004 to 2013 developing and emerging economies lost $7.8 trillion in illicit financial flows—around 10 times more than the entire sum of foreign aid, including aid from the UK, that they received over the same period. Illicit outflows are increasing rapidly at an average rate of 6.5% per year, nearly twice as fast as global GDP.

A substantial proportion of that corruption comprises theft by a nation’s leaders of state funds for their own use—in other words, kleptocracy. Putting an end to that kleptocracy and recovering assets stolen by corrupt leaders would enable millions of the poorest in our world to be adequately housed, clothed and fed by helping prevent national treasuries being looted to line the pockets of corrupt politicians and their business cronies.

That so many kleptocrats succeed is not because of a lack of domestic laws; there are 189 parties to the UN Convention against Corruption. Most of them have complied with their obligations under the convention to have appropriate domestic anti-corruption legislation, but to facilitate their criminal activities kleptocrats have gutted their domestic criminal justice systems and taken control of the prosecuting authorities, police and, frequently, courts. There is no better current illustration than President Putin, who with his oligarch accomplices has looted the country.

Another prime example, whom I have mentioned already, is former South African President Jacob Zuma, who with his business cronies the Gupta brothers looted on an industrial scale and deliberately disabled police and prosecutors, so much so that the country was estimated to have lost fully one-fifth of its GDP during his infamous state-captured decade. Across the border in Zimbabwe, the ZANU-PF regime is mired in corruption, which has robbed the Zimbabwean people of what should be a bright economic future. Instead of serving the people, regime leaders, aided by corrupt businesspeople and a prosecutorial and judicial system entirely captured by the ruling party, loot the country at will. Just last week, opposition politician Jacob Ngarivhume was sentenced to four years’ imprisonment simply for calling for peaceful protests against corruption in July 2020.

Few of these kleptocrats keep their ill-gotten gains at home. Billions of dollars of stolen assets are laundered in a number of countries, including China, Hong Kong, Dubai, Singapore, Monaco, Switzerland, some states of the United States, UK overseas territories and, shamefully, London. Recently, the Al Jazeera documentary “Gold Mafia” secretly filmed Zimbabwe officials and business contacts conspiring to launder illicit funds. Those filmed included at least three British citizens—Uebert Angel, Rikki Doolan and Kamlesh Pattni—who made clear on camera their willingness to act corruptly. I know that the Minister cannot comment on those individual cases, but I hope that the National Crime Agency is investigating the activities of these individuals and others named in the documentary and the sources of their wealth, and that the authorities will not hesitate to freeze their funds while these investigations are being pursued.

However, while British authorities can act on crimes committed under UK jurisdiction, there is no international mechanism to prosecute kleptocrats and to seize and return their illicit funds. This gaping vacuum can be filled only by establishing an international anti-corruption court that can hold corrupt leaders and their co-conspirators accountable.

If some of the countries where laundered funds are held would join such a court, the stolen assets could be frozen and then, through orders of restitution, be repatriated to the countries from which they were stolen. If the risk of those funds being misused if returned to a corrupted state are too high, they could be repurposed and repatriated only at a time when they would reach the real victims: the millions in need in those countries.

The envisioned court would have jurisdiction over crimes committed by nationals of an IACC member state and crimes committed on the territory of an IACC member state. It would enforce existing national anti-corruption legislation and would be a complementary new international counterpart to these laws against kleptocrats and their collaborators.

The IACC would be a court of last instance, meaning that it would acquire jurisdiction only in cases in which the appropriate domestic authorities are unable or unwilling to investigate or prosecute the corruption. For the IACC to succeed, it would not be necessary for the countries governed by kleptocrats to join the court—it goes without saying that they would not. The IACC could be established by treaty and quickly become effective if it consisted initially of even a relatively small number of representative states, so long as they included some financial centres and other attractive destinations where kleptocrats frequently launder, hide and spend their stolen assets.

In this way, the IACC would have the potential to prosecute, punish and recover illicit assets from kleptocrats who rule or are very powerful in the countries that might not initially join the court. Most importantly, the threat of criminal prosecution at the IACC would deter other potential crimes of grand corruption by leaders who may otherwise be tempted to emulate the example of the kleptocrats.

The cost of the IACC would constitute a small fraction of the amount of illicit assets that it could seize and return to their originally intended purpose for the public good. In addition to orders of restitution, it could levy funds on those found guilty, which could be used to defray some of the cost of its prosecutions and proceedings.

If the court demonstrates during its early years that it can work effectively and efficiently, many other countries are likely to join it. In the aftermath of kleptocratic government, some developing countries may not have the human and financial resources to fight kleptocracy, so could approach the IACC to come to their assistance. A senior United States federal judge, Mark Wolf, is leading a campaign to establish such a court. Together with others, including the renowned South African jurist Richard Goldstone, he launched a civil society called Integrity Initiatives International. Its main project is to establish the IACC, and it has convened a number of the world’s top international lawyers to begin drafting a treaty for the court. None of its supporters see the court as a panacea that will end the kleptocracy any more than the International Criminal Court has ended illegal or genocidal activity by political leaders. However, it would be one of many tools, domestic and international, that are absolutely essential to combat and, I hope, ultimately defeat kleptocracy.

Almost 300 leading figures from across the world, including 45 former presidents and Prime Ministers and 32 Nobel laureates, have signed a declaration calling for the creation of the IACC. Three Governments—the Netherlands, Canada and Ecuador—have made the establishment of the court an element in their official foreign policy. In January this year, Nigeria became the fourth country to publicly state its commitment to working with other states towards the establishment of the court. Recently, the President of Moldova, Maia Sandu, also committed to joining the emerging coalition of states for the IACC. Additional countries from each region of the world have also expressed their interest in the idea.

The United Kingdom and our legal profession have always led in establishing and participating in international courts of last resort. This started with the ground-breaking Nuremberg trials and went on to include the International Court of Justice and, of course, the International Criminal Court.

The Government’s Integrated Review Refresh, published earlier this year, committed the UK to championing global efforts to ensure that revenues and assets lost to illicit finance are identified and recovered so that low and middle-income countries can self-finance their own development. This commitment was reiterated by the Minister for Development and Africa in his Chatham House speech on 27 April when he said that

“we will bear down on money-laundering and the flows of dirty money which deprive countries of their legitimate tax receipts and represent money stolen particularly from Africa and African people”.

We must live up to these commitments. I therefore urge the Government to accept our amendment and ensure that the UK becomes one of the early and leading supporters of the establishment of the IACC, lending the UK’s weight and expertise to finding the fastest route to the creation of the court and the most effective framework for its operation.

I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with great pleasure to follow the noble Lord, Lord Oates, who made a powerful, persuasive and rich speech. I echo him in paying to the noble Lord, Lord Hain, for all the work he has done in this area.

The noble Lord, Lord Oates, rightly acknowledged that the international anti-corruption court, which I absolutely back—backing for it is clearly growing by the day—is one of many tools that we need to tackle economic crime. My Amendment 106A seeks to put another tool in the toolkit. At the moment, it is perhaps in a prototype stage and is earlier in development than the international anti-corruption court, but it is growing fast and has significant international backing.

I am proposing that the Government should provide leadership in supporting UN General Assembly Resolution 77/244, which was passed on 30 December last year with leadership from Nigeria and the Africa group. It calls on the Secretary-General to prepare a report on how

“to strengthen the inclusiveness and effectiveness of international tax co-operation”.

This has been seen as a step towards a UN convention on the issue and the establishment of international bodies to enforce it. I hope that some noble Lords who are taking part in this debate or who read Hansard later will be interested in joining me in pushing this forward as an issue on which Britain can and should be a leader. Due to the limited scope of the Bill, I have had to cut down somewhat what the General Assembly resolution says, but there are still steps that we can take forward here; I will be very interested to hear the Government’s response to this UN General Assembly resolution.

Following on from what the noble Lord, Lord Oates, said, it is clear that chasing economic crime money, particularly tax evasion, is what is known in the jargon as a wicked problem. The aims of the evaders are simple; their reach is global and the ability to act is measured in seconds. Money can be shifted in less than a click of my fingers. However, national states have very complex goals in development, rights and the rule of law, and their powers are individually restricted within their own borders. Their legal framework is limited in resources, as we discussed in our debate on the previous group, and frequently takes a lot of time to move into action.

It is worth looking at what Attiya Waris, the UN independent expert on the effects of foreign debt, told the UN General Assembly last year:

“The shortcomings of the international and national tax systems require international cooperation and assistance. They cannot be addressed unilaterally”.


The idea of a UN convention got virtually no coverage or attention in the UK but, internationally, there is a great deal of work going on. That was reflected in a letter sent in March to the UN Secretary-General by scores of civil society organisations—including some that will be familiar to noble Lords, such as Action Aid, the Tax Justice Network and World Economy, Ecology and Development.

18:45

That letter put it bluntly, saying:

“Decision-making on global tax rules has been left to non-inclusive forums wherein especially developing countries have not been able to participate on an equal footing. This injustice is at the heart of the failure of the international tax system, which has continued to be characterised by inefficiency, incoherence, and beggar-thy-neighbour policies, which contribute to the alarming growth of global inequality.”

I wanted to put down a broader amendment that addressed all aspects of the UN resolution because I think that what is not illegal tax-dodging is utterly indefensible, taking money from the mouths of hungry children and taking medicines from health systems that are desperately striving to care for their people—but I have gone as far as I can within the limits of this Bill.

A great deal of work has already been done on this. The proposal for a UN convention on tax was published in March 2022 by the Global Alliance for Tax Justice and the European Network on Debt and Development. That draws on examples. There are pre-existing parallels in government structures, approaches and principles from the Rio conventions, international human rights instruments and the WHO framework convention on tobacco control.

It is worth setting out the background to this. It has been said, “Let’s leave this to the OECD”, and the OECD has said, “We’re the organisation that should do this”. Over decades, under its framework, it has had an international tax regime, the main purpose of which was to prevent double taxation. That is what the focus has been—not collecting tax but preventing so-called “over-collection”. It also excludes the majority of the world from its deliberations.

We often hear talk of global Britain and wanting to be world-leading. Here is a real opportunity, as Professor Lorraine Eden from the University of Texas A&M puts it:

“Large changes in international regimes usually require a tipping point and the co-operation of a like-minded club of nation states to lead the change”.

My amendment suggests that Britain should put itself at the forefront of that club of nations. We have the City of London, and a great many lawyers, bankers and other people who, pointed in the right direction, could be very useful to that effort. Competing in a world of laxer and laxer tax regimes has been a disaster for people and planet, an invitation to crime and corruption. Co-operation has to be the way forward to equip the world with the funds to tackle the looming poly-crisis of environmental destruction, human desperation and rampant inequality.

[Baroness Wheatcroft (CB)]

My Lords, I shall speak to Amendment 103. Thanks to the comprehensive introduction from the noble Lord, Lord Oates, I can be relatively brief.

The International Criminal Court in the Hague was established in 2003. Later this month, it will take evidence from representatives of some of the victims of war crimes in Darfur. That is typical of the essential work that the International Criminal Court can do. It is no wonder that there are now calls for Putin to be indicted to this court. Few today would question the need for such an organisation, and now it seems clear that there is a need for an international anti-corruption court.

The noble Lord, Lord Oates, made the case very positively. Kleptocrats are financial war criminals, inflicting huge damage on their countries but, like the dictators who commit genocide and other war crimes, they have impunity to act as they wish in their home countries. They control the police, the prosecutors and the courts. The damage that their greed inflicts on their countries is huge, but those countries are rarely able to bring them to justice. That is why this new court is so essential.

The Panama papers and Pandora papers provided appalling glimpses into the scale of the corruption in which senior officials in many jurisdictions have been involved. The proceeds are scattered around the world. The international anti-corruption court would provide a mechanism for prosecuting those individuals and retrieving those funds.

The United Nations has demonstrated its ineffectiveness in this area. The General Assembly adopted the UN Convention against Corruption in 2003. Getting on for 200 countries have signed it but, sadly, those signatories include most of the worst offenders on Transparency International’s corruption index. Too many countries treat the convention with contempt because their leaders and senior officials preside over corruption-rife regimes. That is why we need this court, and why I put my name to this amendment. It could be set up relatively quickly and could be hugely effective. Its very existence would deter corruption. If the Government want to fight corruption, why would they not support this project?

[Lord Faulks (Non-Afl)]

My Lords, of course, I echo the concern that has been expressed in the speeches so far about international corruption on an enormous scale.

In our debates, we have very much focused on what happens here in the United Kingdom. In our attack on the Government, it is worth bearing in mind that, in 2016, this Government hosted an international corruption summit; it was hosted by the then Prime Minister David Cameron, so many Prime Ministers ago. It was partly as a result of that that we had the then Criminal Finances Bill and there was an impetus—a very slow one, sadly—to set up a register of overseas entities. It was felt that, at least in this country, we should do all we could not to allow our properties and companies to be infected by corruption. Indeed, this Bill seeks to improve what has already been achieved although, in many ways, it has not gone far enough.

I respectfully submit that what is contained in this amendment is pretty aspirational stuff. There is nothing wrong with being aspirational. The International Criminal Court—I have been to conferences there—has had some success, but it must be remembered that Russia is not a party to the ICC and nor is the United States. It is one thing to say that it is relatively easy to set up a court, but you must have the proper means to enforce it and you have to invest huge sums of money in infrastructure. There has to be a degree of realism about this. Surely we should sort out matters at home as best we can first of all; that in itself will contribute to reducing international corruption. Putting on the statute book an obligation to set up an international court of this sort, which is what this amendment suggests, is premature at this stage, although one can do nothing but applaud the sentiments that lie behind it.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, this has been a very interesting debate; it is the first debate in which we have spoken on a more international level. As we heard in our earlier debates, a large proportion of the quantity of money involved in fraud—well over 90%; probably 99%—has an international element; that is at the core of so much of the fraud with which we are dealing.

I congratulate the noble Lord, Lord Oates, on the way in which he introduced this group. I found his introduction rich and compelling. He set out things very fully. The other noble Lords who have spoken have talked about the aspirational nature of this amendment. I do not think that that is a criticism. It is good to hear about the other countries that are already taking a lead in trying to get the IACC set up.

From the Labour Party’s point of view, I have looked at what David Lammy has said on this matter. He has spoken about working internationally—I know that my noble friend Lord Hain led the work on that when he was a Foreign Office Minister—and promised that an incoming Labour Government would fight against dirty money in the UK by creating a transatlantic anti-corruption council alongside the US, EU and other allies. That is a different model from the one proposed in these amendments.

I do not want to stand here as an opposition spokesman saying that we are against what the noble Lord, Lord Oates, and the noble Baroness, Lady Bennett, are proposing but there are other potential models for bearing down on corruption. I listened with some interest to what the noble Lord, Lord Faulks, said about the practicalities of doing this and using legislation such as this to do everything we can on a domestic level, and internationally where we already have direct interest, to bear down on this huge level of corruption. Nevertheless, I thank the noble Lord for introducing this amendment.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the noble Lord, Lord Hain, and the noble Baroness, Lady Bennett, for their amendments in this group. I also thank all noble Lords for speaking in this debate.

I turn first to Amendment 103, which was tabled by the noble Lord, Lord Hain, but spoken to by the noble Lord, Lord Oates. If I may, I associate myself with the remarks of the noble Lord, Lord Ponsonby: the noble Lord, Lord Oates, made an incredibly powerful and eloquent case in moving this amendment 103, which also spoken to by the noble Baronesses, Lady Bennett and Lady Wheatcroft. Ensuring that those who are responsible for the most egregious acts of corruption are held to account is obviously vital. There should be no tolerance towards those who steal from the public to satisfy personal greed. The Government wholeheartedly endorse the premise that this amendment seeks to advance. The international community can and must do more to deter and punish acts of corruption.

The Government are taking robust action to ensure that the UK leads by example. That is why, in March, we published the second public-private economic crime plan, to which I referred in our debate on the previous group of amendments, which outlines ambitious actions to prevent the UK’s open economy being exploited by criminals and corrupt actors. The Government are also developing a new UK anti-corruption strategy to build on the progress made by the previous strategy and outline a refreshed approach to tackling corruption and illicit finance both in the UK and internationally.

The recently published fraud strategy also sets out the Government’s commitment to raise the priority of fraud on the international stage. We will drive forward global action through developing stronger relationships with international partners, culminating in a global fraud summit chaired by the Home Secretary and held in the UK next year. The summit will bring together leaders from Governments, law enforcement and the private sector to announce the ambition to deliver a comprehensive and co-ordinated approach to tackling fraud over the next five years.

The Government have consistently invested in efforts to bring those responsible for corruption to justice. The international corruption unit in the National Crime Agency is a specialist capability that investigates corruption cases with UK links.

[Baroness Bennett of Manor Castle (GP)]

On the summit, the problem with ideas such as that put forward by the noble Lord, Lord Ponsonby, about a transatlantic council or similar, is that it would be focused on global north countries. Can the Minister assure me that there will be full representation of global south countries at the summit he just outlined and that the UK will provide resources to ensure that some of the least developed countries, which are some of the biggest victims of this, are also able to participate in that summit?

[Lord Sharpe of Epsom (Con)]

I cannot provide that reassurance; I do not know who will be involved, but I will endeavour to find out and will write.

I shall return to where I was in my speech. In addition, the UK leads and hosts the International Anti-Corruption Coordination Centre—the IACCC—which brings together specialist law enforcement officers from multiple agencies around the world to tackle allegations of corruption. The IACCC has helped to secure convictions in high-profile money laundering cases, including in Malaysia and Angola. In 2022 alone, the IACCC identified more than £380 million of stolen and hidden assets.

I forgot to mention part of my previous paragraph. Since 2006, 30 people and companies have been convicted of corruption offences and more than £1.1 billion of stolen assets have been frozen, confiscated or returned to developing countries. That is in relation to the international corruption unit in the NCA.

19:00

Having said all that, there is no doubt that more needs to be done to combat corruption, but I am afraid that the Government are not currently able to endorse the creation of a new, bespoke institution in the form of an international anti-corruption court. The FCDO has been actively engaging in international discussions on this subject over the past year and will continue to do so. It is clear from these discussions that there is a lack of international support for an international anti-corruption court, and this is currently a significant barrier to its likelihood of success. Greater international consensus on the need and mandate of an international anti-corruption court is required before international negotiations on such a body can be considered.

It is also important to note that an international anti-corruption court would come with significant financial implications. As a comparison, the operating cost of the International Criminal Court for 2022 was approximately €160 million. Before establishing an international anti-corruption court, we would need to be confident that its impact would justify such a cost.

While the Government are not able to support this amendment, the noble Lord should be commended for raising this important issue. The Government remain committed to holding the perpetrators of corruption to account. Ownership of international treaties and jurisprudence sits with the FCDO, and I know that my ministerial colleagues there have noted the interest in this amendment and would welcome further exchanges with the noble Lord to consider the options available to accelerate international action.

[Lord Browne of Ladyton (Lab)]

I am conscious that I did not contribute to the debate on this, but is it too late to get the word “anti-corruption” into the communique for the pending G7, which takes place between 17 and 23 May in Hiroshima? That word is nowhere in the Foreign Ministers’ communique on 19 April after they met, I think, in Japan. The communique covers almost everything in which one can imagine we would be interested in involving those countries that share our values, but that is not there.

[Lord Sharpe of Epsom (Con)]

The noble Lord will not be surprised to know that I do not know, but I will ask.

The Government will endeavour to update your Lordships’ House on their plans for progressing international action on corruption in due course. I hope the noble Lord, Lord Hain, and the noble Lord, Lord Oates, on his behalf are reassured by the Government’s commitment to combatting corruption. We look forward to further discussions on this subject and to setting out our plans in further detail at an appropriate time. I therefore ask the noble Lord to withdraw his amendment.

Turning to Amendment 106A, tabled by the noble Baroness, Lady Bennett, the Government care deeply about tackling tax evasion and avoidance. My ministerial colleagues continue to work closely with the various sub-committees that sit within the UN’s Economic and Social Council. However, standard-setting powers on tax currently sit within the Organisation for Economic Co-operation and Development’s inclusive framework and global forum, and the UK believes that this is the mechanism best placed to deliver consensus-based reforms aimed at tax avoidance and evasion.

The inclusive framework and the global forum have wide and diverse memberships of more than 140 and 160 countries respectively. Furthermore, the OECD holds strong technical expertise in matters of international tax avoidance and evasion, and a potential UN convention on global tax evasion as envisaged by this amendment would duplicate and be likely to hinder the OECD’s work. This would delay the co-ordinated global response and effort to address tax evasion and avoidance and combat harmful tax practices, as well as creating divergence in international tax standards.

Having said that, the UK will engage constructively with the upcoming report by the UN Secretary-General. We want to find ways to improve international co-operation, as I have said, but to do that we want to ensure that this captures the full range of existing mechanisms for international tax co-operation and considers creatively how they could be improved better to meet developing countries’ needs. We have submitted evidence to the UN Secretary-General demonstrating these points.

Having said all that, obviously I ask the noble Baroness not to move her amendment.

[Lord Oates (LD)]

My Lords, I thank all noble Lords who have spoken in this debate; I particularly thank the noble Baronesses, Lady Wheatcroft and Lady Bennett, for their support. I am sympathetic to the amendment tabled by the noble Baroness, Lady Bennett. I am grateful to the Minister and the noble Lord, Lord Ponsonby, for their thoughtful responses. I am disappointed by the Minister’s conclusion, obviously, but I hope that, as he suggested, we can continue those discussions going forward.

I want to reassure the noble Lord, Lord Faulks, that my purpose was not to come as a critic of the Government. Indeed, I highlighted commitments made by the Government in the Integrated Review Refresh and I commend the Minister for Development and Africa on his real focus. He understands how important this is. Overseas development assistance is nothing compared to getting this right.

I am not sure that I share his views on the International Criminal Court and other international criminal tribunals. One of the great proponents of this international anti-corruption court is retired Justice Richard Goldstone. He was the chairman of the international criminal tribunal on the former Yugoslavia, which convicted a number of key figures including Ratko Mladić and Radovan Karadžić. It does have impact. We should be aware that, even for the non-signatories of the ICC, it has consequences. It has consequences for President Putin that he has been indicted, such as consequences on whether he can travel to BRIC countries that are signatories to that court.

On the charge of being aspirational, I plead entirely guilty. You cannot get real change in the world unless you are aspirational. Of course, as I said in my opening speech, this amendment is not a panacea; it is one tool. One of the most important things, as the noble Lord, Lord Faulks, said in his remarks, are the enforcement powers that we have in the UK, which, in my view, we are not using as much as we should be. I hope that, through this Bill and other means, we will do much more on enforcement.

As we have heard in the previous debate and amendments, this is really about the mechanisms to enforce lots of things; it is not about the laws. There are loads of laws on this stuff generally; it is about enforcement mechanisms. The international court would be another enforcement mechanism but, of course, we need enforcement mechanisms at home.

With that, I thank everybody who has taken part in the debate and I beg leave to withdraw the amendment.

Amendment 103 withdrawn.

Amendment 104 not moved.

[The Deputy Chairman of Committees (Lord Lexden) (Con)]

Lord Cromwell, are Amendments 105 and 106 not moved?

[Lord Cromwell (CB)]

My Lords, we had a vigorous debate on Amendments 105 and 106, which attracted a lot of cross-party support. I certainly intend to return on Report and look forward to working with the relevant Minister and other Members of this House to improve on them. We had a certain amount of talk about dogs earlier on this afternoon. I should advise the Committee that my wife tells me that I am a terrier in human form. So, in not moving my amendment, I say to the Minister, very gently and in a friendly way, the words of that old Roman mosaic: “Cave canem—beware of the dog”.

[The Deputy Chairman of Committees (Lord Lexden) (Con)]

After the human terrier, we continue.

Amendments 105 to 106B not moved.

Amendment 106C

Moved by

[Lord Agnew of Oulton]

106C: After Clause 187, insert the following new Clause—
“Civil recovery: costs of proceedings
After section 313 of the Proceeds of Crime Act 2002 insert—“313A Costs orders(1) This section applies to proceedings brought by an enforcement authority under Part 5 of the Proceeds of Crime Act 2002 where the property in respect of which the proceedings have been brought has been obtained through economic crime.(2) The court may not make an order that any costs of proceedings relating to a case to which this section applies (including appeal proceedings) are payable by an enforcement authority to a respondent or a specified responsible officer in respect of the involvement of the respondent or the officer in those proceedings, unless—(a) the authority acted unreasonably in making or opposing the application to which the proceedings relate, or in supporting or opposing the making of the order to which the proceedings relate, or(b) the authority acted dishonestly or improperly in the course of the proceedings.””Member’s explanatory statement
This amendment extends the costs cap for civil asset recovery cases beyond Unexplained Wealth Orders. It aims to create a consistent enforcement landscape that does not hinder law enforcement agencies' ability to recover the proceeds of crime. It retains safeguards on costs for improper action taken by prosecuting authorities.

[Lord Agnew of Oulton (Con)]

My Lords, this amendment would help to protect enforcement bodies from the serious risk of high adverse costs when undertaking recovery action against deep-pocketed suspects who can afford the very best legal representation. This risk creates a huge downward pressure on law enforcement activity. The Government introduced a new costs order in March last year for the use of unexplained wealth orders; we have talked about those a lot. It ensured that costs would not be awarded unless the law enforcement authority had acted unreasonably, dishonestly or improperly.

UWOs are just one tool for recovering assets in the UK’s recovery regime and, as we have discussed this evening, are arguably less important in the eyes of law enforcement than other recovery tools. Extending the costs orders introduced in the ECA 2022 would significantly increase the appetite for undertaking recovery cases and inevitably lead to more asset recovery. Even the Law Commission in a recent report recommended that in confiscation hearings following a criminal trial, if the prosecution is unsuccessful but can argue that their application was reasonable, each side bears its own costs. Given that this is a Law Commission recommendation for criminal confiscation and that limited liability for costs has been introduced for UWOs, we are proposing to extend this limited liability to all cases of civil criminal asset recovery.

Civil society and civil servants at the NCA and the SFO have all reported that adverse costs can play an important role in cutting agencies’ appetite to pursue costs. In fact, no cases seem to have been undertaken against Russians in the UK since the outbreak of the Ukrainian invasion. Evidence I have heard from law enforcement bodies suggests that there is a significant caseload of potentially high-risk cases in the pipeline which bring significant cost risks. This includes more than 60 cases being reviewed by one prosecution authority with close to £1 billion in assets frozen by an enforcement body.

Tackling kleptocrats and politically exposed persons will involve going against the very best and most expensive lawyers, unpicking complex corporate vehicles and reams of evidence. Cost exposure poses a real hurdle to the use of civil recovery. In addition, as we have heard so often during this series of Grand Committees, this is not a party-political issue. Indeed, it has been raised previously by Conservative MP Nigel Mills, who sought an amendment during the passage of the Criminal Finances Act 2017, which we heard about briefly from the noble Lord, Lord Faulks, so that the costs could be awarded on an indemnity basis.

In the six years or so that have elapsed since then, we have had the huge move in principle by the Government to allow this capping to take effect for UWOs. Given that that Rubicon has been crossed, I simply do not understand why the Government are reluctant to extend it. We hear so often in the rebuttal of our amendments that it is not the right time, there is no room in the legislative calendar, the cost is too great and the principles are not there, but this is a situation where none of those issues exists. The Government accept that the principle can apply in some forms of recovery. All I ask for in this amendment is that we broaden the scope of the cost capping, which will dramatically improve our ability to go after some of these bad actors. I beg to move.

[Lord Leigh of Hurley (Con)]

My Lords, I will speak to this amendment, which I have signed. Once again, I find myself agreeing with every word that my noble friend Lord Agnew has said, so I will be very brief.

The extension of a new cost regime to all of Part 5 of POCA in the case of economic crime would encourage law enforcement bodies to act ambitiously but also reasonably in bringing civil recovery cases, and it has the potential to ensure that significantly more stolen assets and proceeds of fraud and corruption can be recovered and returned to the victims—as we would all want—but also reinvested back into law enforcement agencies themselves, which is the major problem, through the asset recovery incentivisation scheme. That would help them enhance their capacities and give them the confidence to go after cases which they are not doing at the moment.

A number of us had the honour to be briefed by Bill Browder on the Bill. Of the many subjects that we discussed, this was the one amendment that he felt would be helpful and useful for us to pass. What greater man is there than Bill Browder to suggest to us that we adopt a particular route? If the man can create a Magnitsky Act which has been adopted by pretty much every civilised country in the world, perhaps we can just take one clause in this Bill to enhance our fight against economic crime.

19:15

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I, too, added my name to this amendment, which is supported by these Benches. This issue gets us back to David versus Goliath, which we have mentioned in previous groups. Unfortunately, the culprits are Goliath, and our prosecutors are left having to face culprits with far deeper pockets than theirs. There are alternatives, such as creating larger budgets for prosecutors, that have already been dismissed.

Maybe within asset recovery there is some glimmer of attracting a better recompense, but that is not a perverse incentive because if the prosecuting authorities took actions improperly and overreached themselves, the safeguarding clause in this amendment would come into operation. In the way the amendment is drafted, there are not perverse incentives but good incentives to bring more actions that are presently not brought simply because they are unaffordable. It makes us a bit of a laughing stock that we have very strong laws in parts but cannot enforce them.

Everything else has been said. I commend this amendment and await with interest to see what excuses the Government come up with not to accept it when the precedent and the need are there and the amendment contains a safeguard and therefore it could be put into operation very effectively and swiftly.

[Lord Trevethin and Oaksey (CB)]

My Lords, I will say a few brief words in support of this amendment and place it in its proper legal context. When it was mentioned at Second Reading, the Government’s response was simply to say that the principle that the loser pays the costs of unsuccessful litigation or an unsuccessful application was regarded as a valuable principle and that they did not see sufficient reason to move away from it in this field. It is a salutary principle and it operates in civil litigation for the most part, but there are exceptions. There are already statutory precedents for a regime of the type that this amendment seeks to create, namely a regime in which the enforcement agency will not invariably have to pay the costs if an application is unsuccessful.

I will say a few words about a different, but quite closely related, area of law in which a regime of the type that this amendment contemplates has been created by the judges. In the field of professional discipline and professional regulation, there has been for some time a well-established principle that the regulator will not automatically have to pay costs merely because the application or prosecution that it has commenced has proved to be unsuccessful. It is known as the Baxendale-Walker principle and works perfectly well in practice.

I shall explain shortly how it works in practice. The proceedings are initiated and the respondent, being a professional person, is expected to engage properly and conscientiously with the regulator and to respond candidly, or with a reasonable degree of candour, to the points being made against him or it. If the regulator then continues unreasonably with the prosecution or disciplinary action and fails, it will be made to pay the costs of the matter. However, if the regulator at all times acts reasonably, the presumption will be that it will not be made to pay the costs of the matter.

The reason why the law has created that regime is precisely the reason that is contemplated by this amendment—namely, that it is strongly in the public interest that regulators and enforcement agencies should not be deterred from bringing proper proceedings by the risk of paying exorbitant costs bills to respondents who manage to successfully resist the application in question.

I think I have said enough to convey the point. I really do not understand why the Government are so reluctant to consider introducing a regime of this sort more widely across the field of economic crime. It already exists in relation to certain types of economic crime, and it works well in the field that I have mentioned. I would be very interested to hear the Minister’s response.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I support this amendment. As the noble Lord, Lord Agnew, said when he introduced it, cost exposure for prosecuting authorities can pose a real hurdle to their pursuing those prosecutions. As he also said, the Rubicon has been crossed in allowing cost capping, which the Government did in March 2022. This amendment has real legs—if I can use that phrase—and I hope the noble Lord presses the matter further, perhaps at later stages of the Bill.

I too was at the briefing with Bill Browder. I am currently reading his second book, having read his first, and it is compelling reading. He is a very brave man. I also agree with the comments made by the noble Baroness, Lady Bowles. I think she said: the precedent and the need are there, and the solution is here. I agree with those sentiments.

Finally, I thank the noble Lord, Lord Trevethin and Oaksey, who set out, interestingly, that some judges in the civil courts have developed their own law on this matter regarding the enforcement agencies not necessarily having to bear all their costs. He gave an interesting example of a further precedent, if you like. I too will be interested to hear the Minister’s response to that. The matter will be considered very carefully with regard to the later stages of the Bill.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank my noble friend Lord Agnew for tabling this amendment and all noble Lords for the points they have raised in this debate. Again, I reassure the Committee that the Government take economic crime very seriously and are taking the necessary steps to ensure that enforcement agencies can tackle illicit financial activities while upholding the fundamental principles that govern our entire civil justice system.

In civil legal proceedings the loser generally pays the legal costs of the winning party, as has been acknowledged. The “loser pays” principle is a fundamental pillar on which the whole basis of civil litigation operates. It helps to ensure that only stronger cases are brought and that the winning party is able to recover reasonable costs of vindicating their case, save for in exceptional circumstances, to ensure access to justice for individuals with very limited resources. While important, civil recovery proceedings brought by enforcement agencies are not so exceptional as to warrant undermining the “loser pays” principle.

Several noble Lords have raised with me, and during this debate, the changes made to the unexplained wealth order regime by the Economic Crime (Transparency and Enforcement) Act 2022. These amended provisions in the Proceeds of Crime Act—POCA—introduce “costs protection” for enforcement agencies in cases of UWOs, unless they act unreasonably. This aimed to remove barriers to the use of UWO powers by relevant law enforcement teams. This was done on the basis that they were exceptional and likely to be low in volume in comparison to other types of civil recovery and, furthermore, that the relevant cost rules would be positioned as a novel and unique proposal, thereby maintaining the overall integrity of the “loser pays” principle in all other civil recovery proceedings. In the last five years, agencies with civil recovery powers—the Crown Prosecution Service, the National Crime Agency, the Serious Fraud Office, the Financial Conduct Authority and HM Revenue and Customs—have not paid any adverse costs for civil recovery proceedings.

There is also no guarantee that the introduction of further costs protection would lead to enforcement agencies pursuing more cases, as they report that each case must be assessed on its own merits considering numerous factors independent of costs liability, including gathering sufficient evidence to pursue a case and internal resourcing capability.

It is also worth bearing in mind that the Civil Procedure Rules, which guide the courts in procedural matters—I think this goes some way to answering the points raised by the noble Lord, Lord Oates—

[Baroness Bowles of Berkhamsted (LD)]

As I interpret what the Minister has said, if the regulator is taking the costs risk into account, that means it will take into account the question: am I up against a really wealthy opponent? Therefore, we will not have equal justice. You are saying that if the person from whom you are trying to recover the asset is particularly wealthy, they will be able to string out the process and do more appeals. That increases your costs risk and, therefore, the wealthy will not be pursued as much as the less wealthy. That is a very bad precedent and another reason why the amendment in the name of the noble Lord, Lord Agnew, is surely needed.

[Lord Sharpe of Epsom (Con)]

The noble Baroness makes an interesting point. I was talking about unexplained wealth orders in respect of the Economic Crime (Transparency and Enforcement) Act 2022. To go over that again, it aimed to remove barriers to the use of UWO powers by relevant law enforcement teams, but it was done on the basis that these were exceptional and likely to be very low in volume in comparison to other types of civil recovery. I do not think that is inconsistent with the argument about this amendment.

Going back to the procedural rules, which guide the courts in procedural matters, these enable judges to use their discretion to limit legal costs in certain circumstances. In appropriate cases, they may be used by agencies when pursuing asset recovery cases and are therefore a more suitable way of limiting costs liability in the few circumstances where this may be needed rather than through wholesale reform of the loser pays principle in civil recovery.

The amendment would overturn the very basis on which the entirety of civil costs and funding is built. It would negatively affect every other category of civil litigation, all for minimal, if any, financial savings in a very limited number of cases—

[Lord Agnew of Oulton (Con)]

Could my noble friend explain why this overturns precedence, while the Act last year on unexplained wealth orders does not? That is why I am so confused.

[Lord Sharpe of Epsom (Con)]

My Lords, I think I have already explained it, but I will endeavour to do so in greater detail in writing, if that is acceptable.

In a very limited number of cases, law enforcement would be involved. If parties in civil litigation do not fear having to pay adverse costs, it risks encouraging spurious and unmeritorious claims. On this basis—and I will write—I ask my noble friend to withdraw his amendment.

[Lord Agnew of Oulton (Con)]

I thank my noble friend the Minister for his explanation. I am afraid that I do not accept it, but I understand the convention that I need to withdraw my amendment. However, I will need to bring this back on Report; it is fundamental to our attempts to get a grip of economic crime in the system. I ask the Minister to reflect not only on my comments but those of other Peers who have supported the amendment and, indeed, the noble Lord, Lord Trevethin and Oaksey, who has come up with yet another example that I was not familiar with.

I was clear in my amendment that there is absolute protection against overreach by government agencies that are seen to act unscrupulously, so I do not accept that there is a risk. We know that we are not going to fund these agencies properly. Common sense tells us that they have to do a very careful risk analysis of any case they take on. If they think they have less than an 80% chance of winning it, they will not do it. I know that from my own experience as a Minister. Time and time again, early on in my career as the Academies Minister when I was trying to root out fraud there, I was told that the risks were too high and that we did not have the budget if we lost the case. It is not complicated.

I urge my noble friend the Minister to reconsider. My noble friend Lord Leigh was right—when we heard from Bill Browder a few weeks ago, he was adamant that, if there is one thing this Bill should do, it is to bring in this costs cap so that we can weaponise the agencies to go after economic crime. I beg leave to withdraw my amendment.

Amendment 106C withdrawn.

Committee adjourned at 7.30 pm.