Tuesday 21st February 2017
(7 years, 2 months ago)
Commons ChamberCriminal Finances Act 2017 View all Criminal Finances Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2017 - (21 Feb 2017)
17:18 - The House divided: - Ayes: 180 / Noes: 301 - Question accordingly negatived.
17:32 - The House divided: - Ayes: 241 / Noes: 300 - Question accordingly negatived.
The Minister for Security (Mr Ben Wallace)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 1—Civil recovery: gross abuse of human rights—
‘(1) Part 5 of the Proceeds of Crime Act 2002 (civil recovery of the proceeds etc. of unlawful conduct) is amended as follows.
(2) In section 241 (which defines unlawful conduct), after subsection (2), insert—
“(2A) Conduct which—
(a) occurs in a country or territory outside the United Kingdom and has been designated as conduct by a person connected to a gross human rights abuse in accordance with the provisions of section 241B, and
(b) if it occurred in a part of the United Kingdom, would be or would have been unlawful under the criminal law of that part at the relevant time,
is also unlawful conduct.”
(3) After section 241 (which defines unlawful conduct), insert—
“241A Conduct connected to a gross human rights abuse
(1) “Conduct connected to a gross human rights abuse” means—
(a) involvement by a Person (“A”) in torture or other serious breaches of human rights and fundamental freedoms against a Person (“B”) where B sought or seeks—
(i) to expose illegal activity carried out by foreign public officials, or
(ii) to obtain, exercise, defend or promote human rights and fundamental freedoms,
(b) activities by a Person (“C”) as an agent in a matter relating to an activity by A described in paragraph (a),
(c) activities by a Person (“D”) to profit from, materially assist, sponsor, or provide financial, material or technological support for, or goods and services in support of, an activity by A described in paragraph (a),
(d) commission by a Person (“E”), whether or not a foreign public official, of the illegal activity described in paragraph (a)(i).
(2) For the purposes of this section, it is immaterial where the conduct occurred.
(3) In this section “human rights and fundamental freedoms” means the “Convention rights” as defined in section 1 of the Human Rights Act 1998.
241B Designation of conduct connected to a gross human rights abuse
‘(1) The High Court may make an order designating that the actions of the respondent constitute conduct connected to a gross human rights abuse and, if considered appropriate, that—
(a) a person is prohibited from dealing with property, funds or economic resources owned, held or controlled by the respondent if the person knows, or has reasonable cause to suspect, that the person is dealing with such property, funds or economic resources,
(b) a person is prohibited from making property, funds or financial services available (directly or indirectly) to the respondent if the person knows, or has reasonable cause to suspect that the person is making the funds or financial services so available,
(c) a person is prohibited from making funds or financial services available to any person for the benefit of the respondent if the person knows, or has reasonable cause to suspect, that the person is making the funds or financial services so available.
(2) An order under subsection (1) may only be made on application.
(3) An application for an order under subsection (1) may be made by—
(a) the Secretary of State,
(b) an individual, or
(c) an entity, including a non-governmental organisation.
(4) An application for an order under subsection (1) must be supported by a statement of information which addresses—
(a) the circumstances surrounding the respondent’s conduct connected to a gross human rights abuse, and
(b) the nature and extent of the respondent’s involvement.
(5) An application for an order under subsection (1) may be made without notice to the respondent to a judge in chambers.
(6) The Court must be satisfied that it is in the public interest to make an order under subsection (1).
(7) The Court shall reach a decision on an order under subsection (1) on the balance of probabilities.
241C Duration, extension, variation and discharge of an order
‘(1) The High Court shall specify the duration of an order under section 241B(1) which shall not exceed two years.
(2) In determining the duration of an order, the Court shall have regard to the likely duration of consequential proceedings under this Part.
(3) The Court may extend an order for a maximum period to two years at any time before it expires, if it is satisfied that the requirements of a designation order continue to be met.
(4) An extension application may be made without the need for a hearing if the court considers it appropriate.
(5) An application to extend, vary or discharge an order may be made to the court by—
(a) the Secretary of State,
(b) the applicant,
(c) the respondent, or
(d) any person affected by the order.
(6) An application to discharge a designation order must be made by the applicant as soon as reasonably practicable in circumstances where the requirements of an order are no longer satisfied.
241D Appeals, etc.
‘(1) The following persons may appeal to the Court of Appeal in respect of the High Court’s decision on matters falling to be decided under sections 241B and 241C—
(a) the applicant,
(b) the respondent, or
(c) any person affected by the order.
(2) On an appeal under subsection (1) the Court of Appeal may—
(a) confirm the decision, or
(b) make such orders as it believes appropriate.
(3) An appeal lies to the Supreme Court from a decision of the Court of Appeal on an appeal under this section.
(4) An appeal under this section lies at the instance of any person who was a party to the proceedings before the Court of Appeal.
(5) On an appeal under this section the Supreme Court may—
(a) confirm the decision of the Court of Appeal, or
(b) make such order as it believes is appropriate.
241E Standard to be applied
All matters to be determined by a court under sections 241B to 241D are to be decided on the balance of probabilities.
241F Costs
In the exercise of its discretion, a court may, on application, make a costs capping order in respect of proceedings under sections 241B to 241D.
241G Duties in respect of gross abuse of human rights
‘(1) It shall be the duty of the Secretary of State to apply for an order under section 241B where the Secretary of State is satisfied that—
(a) the requirements for the making of an order are met; and
(b) it is in the public interest to make the application.
(2) It shall be the duty of the Secretary of State to maintain a public register of—
(a) individuals in respect of whom orders have been made under section 241B(1),
(b) the circumstances giving rise to the making of such orders, and
(c) any decisions of a court under sections 241C and 241D in relation to such orders.
(3) In any case where a relevant authority considers that evidence is available of property being held by a person in respect of whom an order has been made under section 241B which may represent property obtained through unlawful conduct, it shall be the duty of the relevant authority to seek to initiate proceedings for civil recovery under this Part.”
(4) In section 304 (which defines recoverable property), after subsection (1), insert—
“(1A) Property of a person who is the subject of a designation order under section 241B is presumed to have been obtained through unlawful conduct unless the contrary is shown by the respondent.””
This new clause extends the scope of unlawful conduct for the purposes of Part 5 of the Proceeds of Crime Act 2002 to cover to certain actions connected to a gross human rights abuse which has taken place abroad.
Government amendments 58 and 59.
Mr Wallace
Some time has passed since we last considered this Bill. There was, as hon. Members will recall, a great deal of cross-party consensus on it, both on Second Reading and in Committee, and I hope that we will be able to continue in that same spirit of constructive debate and healthy scrutiny today.
This first group of amendments concerns the extremely grave matter of gross human rights abuses or violations. The Government are committed to promoting and strengthening universal rights globally, and I welcome the opportunity to debate this issue. In particular, these amendments have been prompted by the harrowing case of Sergei Magnitsky. Magnitsky was not a serious criminal; he was a lawyer who tried to blow the whistle on large-scale tax fraud in Russia, and he believed that he would be protected by the law. Unfortunately, he died in state custody in 2009 after suffering both mistreatment and assault, and being denied medical attention. I share the strong feelings of many hon. Members about this case, and I want to reassure the House that the Government have expressed, both publicly and to the Russian Government, our serious concerns about Mr Magnitsky’s death. Of course, we must also remember that his case is only one of many atrocious human rights violations committed globally each year.
As I am sure that hon. Members will highlight, the US has legislated to prohibit the entry of certain named individuals to the US and to forbid them use of the US banking system. Less than two months ago, President Obama’s Administration extended the legislation so that it could be applied to those involved in human rights violations, wherever in the world they have taken place. That sends an important signal that perpetrators of gross human rights violations will face consequences. However, we have an entirely different legal system, which merits a different approach.
I pay tribute to those hon. Members who have raised this issue by tabling new clause 1—in particular, my hon. Friend the Member for Esher and Walton (Mr Raab), the right hon. Members for Barking (Dame Margaret Hodge) and for Carshalton and Wallington (Tom Brake), and the hon. Member for Ross, Skye and Lochaber (Ian Blackford). I am grateful to hon. Members for giving me advance notice of the amendment, and am pleased to have had the opportunity to discuss it with many of its signatories.
It has always been the Government’s position that for further legislation to be warranted on this issue, there would need to be a real case that existing powers were insufficient. I hope that hon. Members will agree that we should avoid doing anything that might have an impact on the effectiveness of our existing sanctions and civil recovery powers. The National Crime Agency has confirmed that it has considered all the material provided to it on the Magnitsky case. It concluded that the individuals whom we believe to be connected to the case do not reside in the UK, and it has identified no assets of value in the United Kingdom that are connected to the case, so the additional powers proposed in new clause 1 would have no obvious material effect on the individuals involved in this case.
Mr Jonathan Djanogly (Huntingdon) (Con)
The point about the Magnitsky Act in the US is that it pulls together the visa ban, the ban on using American banks and the inability to trade there; the advantage is that it is all pulled together. I appreciate that the scenario is different in this country, but will the Minister please explain how he intends to pull the links together in this country, using the different pieces of existing legislation?
Mr Wallace
I am grateful to my hon. Friend for that point. I will get to that later in my speech, but we have to recognise this difference between the United States and the UK: here, most of our sanctions regimes are under the European Union umbrella. Of course, there will be time to discuss those sanctions, and the United Kingdom’s post-Brexit arrangements, at a later date. When it comes to sanctions, we have slightly different dispersals of authority and power from the United States, which often can, and does, act entirely unilaterally in this area; we should point that out.
One problem with new clause 1 is that we think it would be non-compliant with our domestic human rights law, because it contains no derogations. It would freeze all the assets of a designated individual, so they would not have any funds for living expenses or medical treatment, or to pay for legal representation. The reversal of the burden of proof, so that it would be assumed that all assets owned by designated individuals were the proceeds of their unlawful conduct, would also be an unprecedented step. That is incongruous with the existing civil recovery regime and could be judged by the courts to be disproportionate.
However, we recognise the strength of feeling on this matter, and understand the deterrent effect that such an amendment would have on those who seek to profit from the gross abuse or violation of human rights overseas.
Tom Brake (Carshalton and Wallington) (LD)
The Minister is clearly very well informed on this issue, and I know that he has had meetings on the subject. If assets connected to the case were identified in the UK—I know that there is a dispute with Bill Browder, who believes that there are such assets here—is the Minister confident that existing legislation or his new clause 7 would enable them to be frozen?
Mr Wallace
I am grateful to the right hon. Gentleman for his point. I have to respect the boundaries of our law enforcement agencies. As a Minister, I cannot direct them to take action; they have an operational freedom and independence that we value greatly in this country. They have said to me that should actionable evidence be presented to them, they would be free to follow that up and enforce the law. Speaking as the Minister, where actionable evidence of gross human rights abuses or other criminal offences is presented, of course we would like to see action taken. This is not about trying to shelter people who have been involved in those offences; it is about trying to make sure that the appropriate action is taken when the correct evidence is presented. I absolutely concur with the right hon. Gentleman’s point: it is important to understand that we need to act on the evidence. If there is evidence, we could take action, even without this legislation. I certainly urge our law enforcement agencies to take action to make sure that people are held to account for the atrocious murder in Russia of Mr Magnitsky.
We have tried to come some way towards meeting many of the concerns of hon. Members by tabling new clause 7 and the consequential amendments 58 and 59. They would widen the definition of “unlawful conduct” in part 5 of the Proceeds of Crime Act 2002 to include torture or
“the cruel, inhuman or degrading treatment”
of those exposing corruption, or obtaining, exercising, defending or promoting human rights, including in cases where that conduct was not an offence in the jurisdiction in which it took place. That would allow any assets held in the UK that were deemed to be the proceeds of such activity to be recovered under the provisions in part 5.
Chris Bryant (Rhondda) (Lab)
The Government’s new clause 7 contains no duty on the Government to act at all; they can simply ignore the provisions. That is one of the key differences between new clause 7 and new clause 1, tabled by the hon. Member for Esher and Walton (Mr Raab).
Mr Wallace
The hon. Gentleman talks about duty, but there are lots of criminal offences on the statute books on which the Government do not have a duty to act. We leave it to the interpretation and freedom of our law enforcement agencies to act. Are we to say that the duty in this case is greater than the duty on the police to act on burglary or on a whole range of other criminal offences? The fundamental issue is that the hon. Gentleman wants to put a duty on the Government for one specific type of criminal offence, which would, I am afraid, hinder the freedom of our law enforcement agencies to take the appropriate action when the evidence was presented to them.
Chris Bryant
But in the Government’s new clause, as opposed to new clause 1, there is no provision for third parties to bring a case to the courts to allow the seizure of assets, so, yet again, the Government are closing off the options for tackling money laundering in London and the UK.
Mr Wallace
I am afraid we are not. The National Crime Agency, the Serious Fraud Office and Her Majesty’s Revenue and Customs are not full of people who do not want to do their job. They want to enforce the law: they want to go out and catch the criminals and stop money laundering. It is slightly insulting to imply that if we did not put a duty on them, they would not do it. They would do it. The problem with new clause 1 is that it would allow non-governmental organisations and individuals—it does not define whether those NGOs or individuals are foreign or from the UK—to go to the court, with limited liability, to force the Government to take action, without a high threshold at all.
For example, under new clause 1 a Cuban exile living in Florida who does not like the rapprochement with the Cuban Government could come to our courts to allege human rights abuse and make an application against the Cuban ambassador’s assets in this country, and actually confiscate or freeze those assets. It would not only preclude us from making peace or moving on with some countries, but would allow massive amounts of vexatious claims based on gimmick politics. That is why we have to respect the professionalism and independence of our law enforcement agencies and allow them to make the case based on the evidence presented to them.
Chris Bryant
That is simply not the case. For example, we already regularly have lots of vexatious applications from Russia for the extradition of Russians who are now resident in the United Kingdom, but the court decides. New clause 1 would not allow an individual to decide that somebody’s assets must be frozen; a court would decide.
Mr Wallace
First, the hon. Gentleman misses the point that courts do not like vexatious complaints. They do not like time-wasting applications with what would be in the case of new clause 1 limited liability for those people who want to use the court’s time to make a statement. Secondly, applications for deportation are often made by the state. The hon. Gentleman would open it up to individuals all over the world to come to our courts, without liability, to make the case for or to make a gesture out of freezing individuals’ assets, without any recourse to the state or even necessarily to evidence. That would open up a whole can of worms for countries around the world.
I shall give another example. We have sponsored and supported the peace deal in Colombia. Should the Colombian Government at some stage choose to send somebody with a background in the FARC to represent them or to be a cultural attaché in their embassy or something, and somebody in Colombia does not like that, under new clause 1 they could, as an individual, come to a court here and make a tokenistic application. The judiciary might throw it out, but there is capped liability, so the court’s time could be wasted writ large by lots of people making statements and blocking the courts.
Mr Djanogly
Have the Government considered whether any application should go first to the Attorney General before being allowed to proceed? That might stop the abuse that the Minister is suggesting.
Mr Wallace
We did consider that in consultation with the office of the Attorney General and the Solicitor General, but it was felt that there was not the appropriate need for that, so we progressed with new clause 7 as it is drafted. We should remember that we are putting on the statute book a new power to take action based on gross human rights abuse, torture and degrading treatment. We have not done that before and it is a major step. It is a major signal to countries around the world that if evidence is presented, we could interdict with their assets. That sends the powerful message that London and the United Kingdom are not bases for them to put their assets or ill-gotten gains from such behaviour.
Sir Eric Pickles (Brentwood and Ongar) (Con)
Surely that is the substantive point. The concern would be that we would get not only vexatious complaints, but complaints designed for publicity, in the almost certain knowledge that such complaints would not be seen through by the courts and there would be virtually no cost to the people making the complaint. New clause 7 provides the opportunity to nab the guilty, and it says to people that bloodstained dictators have no place putting their money in this country.
Mr Wallace
My right hon. Friend is absolutely right that it sends a message, but it also respects the independence of our law enforcement agencies so that they can apply the law and take action when they are presented with evidence, which will ensure that the courts’ time is not wasted and that we get successful results when we deal with these individuals. It will also ensure that it is done in a way such that the Executive retains the initiative to carry out the process and prevent vexatious complaints. Judges will tell us that they do not want their courtrooms to become public relations arenas in which people can make vexatious applications; they want their courts to be able to decide on the basis of evidence. Under new clause 7, they will be able to do that, but we respect the operational independence of our law enforcement agencies.
All that explains why we tabled the new clause. As I have said, it would allow any assets held in the UK that were deemed to be the proceeds of the activities I outlined to be recovered under the provisions in part 5. Of course, any civil recovery would be subject to all the existing processes and legal safeguards in the Proceeds of Crime Act 2002. The court would need to be satisfied, on the balance of probabilities, that the property in question was the proceeds of crime, or was likely to be used to fund further criminal activity. Law enforcement agencies would, as ever, need to consider which of their powers to utilise on a case-by-case basis.
I hope Members will agree that the new clause would send a clear statement that the UK will not stand by and allow those who have committed gross abuses or violations around the world to launder their money here. I have been the Minister in charge of the Bill from the beginning, and when colleagues from either side of the House have tabled amendments, I have asked my officials, “Do they have a point?” I have asked my officials about the evidence set against Mr Magnitsky’s killers and to find out whether we have actually done the work we say we are doing. I make sure; I do not just take things at face value. It is important to say that I am confident that we have not taken action in this case because we have not yet had the evidence to do so or the assets have not been located in the right place. I have checked that out and verified it.
I have come to the House today with an attempt to put a compromise in statute—to put gross human rights abuse on record for the first time. I hope we can send the right message to the regimes, criminals and individuals around the world, while at the same time respecting the law enforcement agencies so that they can carry out their job unhindered by political interference, or by third-party groups or anyone else who might want to use publicity rather than actual evidence to further their cause. That is really important. I shall pause my comments there and wait to hear from other Members, and then respond at the end of the debate.
Richard Arkless (Dumfries and Galloway) (SNP)
It is not fair for us to live in a world in which criminals are free to generate cash and spend it without fear of repercussion. Given what I have learned during the progress of the Bill, I think all Members on both sides of the House would agree with that sentiment. There simply must be a level playing field for the vast majority in society who chose to play by the rules.
Until now, provisions on financial crime have been focused on anti-money laundering regulations and proceeds of crime legislation, which have been specifically geared towards dealing with the proceeds of drug traffickers and bank robbers. In many senses, it has worked. It is not as easy to launder money in 2017 as it used to be, although, sadly, it is not impossible. It used to be the perception of criminals that if they could evade capture and not flash the cash, they could eventually spend their ill-gotten gains. In many cases, criminals looked forward to spending the gains when they were released.
Thankfully, the world has moved on, and this Bill is an attempt to move us another step ahead of the criminals, so that we as a society are fit to attack the finances of criminals in 2017 and beyond. We cannot buy into the rule of law unless we can agree to the evolution of regulations surrounding the financial industry that has happened over the years. Today, we face the threat of grand corruption, particularly in relation to politically exposed people, which is facilitated for the most part—perhaps unwittingly—by the City of London.
Last year, The Guardian revealed, through the Panama papers, how a powerful member of Gaddafi’s inner circle had built a multi-million pound portfolio of boutique hotels in Scotland and luxury homes in Mayfair, Marylebone and Hampstead in London. He was head of Libya’s infrastructure fund for a decade and has been accused by Government prosecutors in Tripoli of plundering money intended for schools, hospitals and infrastructure projects.
Scottish police have confirmed that they are investigating the matter. Libya has made a request for an asset freeze, but, as far as I understand it, the freeze has not been implemented. With the powers contained in the Bill, we could have dealt with such an injustice much more swiftly, so, in general terms, we welcome its provisions. However, as I intimated earlier in this process, our issue is not with what is in the Bill, but with what is not in the Bill. None the less, that list has narrowed as this process has continued.
The Bill does not satisfactorily address corporate economic crime—which we will discuss in the third group of new clauses, which includes proposals on Scottish limited partnerships, on which my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) has done so much to campaign—and the real facilitator of criminal finances: the profit-seeking, responsibility-shedding and self-serving banking culture that we have in the UK and the wider western world. Until we challenge the attitude of the banks that house these moneys, we will never absolutely deal with the criminality. The Bill attempts to deal with the symptoms of the criminality—getting at the assets and seizing them—but it does not deal with the facilitators, the banks, which is a great shame.
New clauses 1 and 7 have been touched on by the Minister, and much of the talk has been about the scope for applicants to bring an application under these provisions. In general terms, those new clauses seek to extend the scope of unlawful conduct. That makes sense in that a public official—or someone acting with the consent or acquiescence of a public official—who is depositing funds in the UK should not be safe on account of that criminality having occurred abroad. I think that most people would agree with that sentiment; it is a sensible and logical step, and one that we support in principle.
The protection of human rights is a profoundly good thing. Violations of human rights should not be allowed to remain hidden behind international borders—they should be there for the world to see—and the consequences of such violations should be global consequences. With the adoption of either new clause 1 or new clause 7, the UK will no longer be a hiding place in that respect, and that is worth lauding.
What are the differences between the new clauses? As has been suggested, there is wider scope for more applicants to make applications under new clause 1. The Government say that that is not necessary, as the judiciary would vet those claims; it would be up to the court, not the applicant, to decide their merits. One other difference is that the ambit of new clause 1 is wider with regard to potential respondents, as it includes more people connected to criminality. Will the Minister touch on the scope of respondents as well as the scope of applicants and the differences between new clauses 1 and 7?
Furthermore, new clause 7 contains a provision, which is mirrored in amendments 58 and 59, to set the limitation period for actions under unlawful conduct to 20 years. In one sense, we welcome that, because without it the standard limitation periods of five and six years would apply. However, given that we are talking about gross violations of human rights—torture and the like—should a perpetrator ever be free from those crimes? Are we saying that, 20 years after someone has committed a gross violation of human rights, their money should be safe? Given that some of these abuses take years to come to light, are there unintended consequences that could let some of the criminals off the hook?
Mr Dominic Raab (Esher and Walton) (Con)
I rise to speak to new clause 1, which is known as the Magnitsky amendment, and to touch on the Government’s new clause 7 in the process.
New clause 1 was tabled by me, the right hon. Member for Barking (Dame Margaret Hodge) and 50 hon. Members representing eight different political parties across the House. That is testimony to the cross-party nature of our ambition, which was kindled by the tragic murder, on the instructions of the Russian state, of the young Russian lawyer, Sergei Magnitsky. In November 2008, Magnitsky was arrested and detained. His crime was to identify the perpetrators of the biggest tax fraud in Russian history, which was committed by the Russian Government against the investment firm, Hermitage Capital, that employed Magnitsky and against the Russian taxpayer to the tune of a mind-boggling $230 million.
For his courage, Sergei Magnitsky was jailed and tortured for almost a year, and then ultimately murdered. The crime was perpetrated by some of the very officials whom Magnitsky had identified. Although those appalling crimes were documented by two Russian investigations, no one has ever been brought to justice in Russia. Perversely, it was Magnitsky who was convicted, posthumously, of fraud—a sickening snapshot of the corrupt and venal state of the Russian justice system today.
Large amounts of the stolen money were subsequently laundered out of Russia, and Hermitage Capital submitted to all the relevant UK authorities detailed evidence of $30 million that was sent to the UK between 2008 and 2012, including to firms run or owned by the Russian mafia. Despite receiving that evidence, the Metropolitan police, the Serious Organised Crime Agency, the Serious Fraud Office, HMRC and the National Crime Agency have never opened a single investigation. Notwithstanding the Minister’s comments, this case also shines a light on the weaknesses of our own justice system, which is what we are here to address today. We should be clear in this House that, although Magnitsky has been the standard-bearing case for reform, it is by no means an isolated case. According to the Home Affairs Committee’s 2016 report on the proceeds of crime, an astonishing £100 billion is laundered through UK banks alone each year, and we know from the NCA that only around 0.2% of that figure is currently frozen.
No one wants Britain to be a competitive global hub that attracts investment and is open to international talent more than I do, but I also want us to be known the world over for our integrity, our commitment to the rule of law and our adherence to the most basic of moral principles. We therefore have to stop turning a blind eye to the blood money of butchers and despots that, frankly, flows all too freely through some UK businesses, banks and property. New clause 1 is designed to address the weaknesses in the current UK asset-freezing regime. I pay tribute to Jonathan Fisher QC, the expert in this field—one of the leading experts in public law and human rights law—who carefully helped us to craft the mechanism.
New clause 1 would enable the Secretary of State, an individual or a non-governmental organisation to convince the High Court to make an order to empower the UK authorities to freeze assets where it can be demonstrated, on the balance of probabilities, to a senior judge that those assets relate to an individual involved in, or profiting from, gross human rights abuses. The clause would put a duty on the Secretary of State to pursue such an order when there is sufficient evidence and when it is in the public interest to do so—there is a measure of flexibility—and would establish a public register of those who are subject to such orders, all against the backdrop of appropriate safeguards and due process in law.
The Government have responded with their own proposal, new clause 7. In fairness, it is only right and proper to pay tribute to the Security Minister and the Foreign Secretary for engaging so seriously with the issue and, ultimately, for being willing to act. New clause 7 would, indeed, mark a significant step forward, principally because it would provide specific statutory grounds for an asset-freezing order based on gross human rights abuses and would target individuals responsible for, or profiting from, such crimes against whistleblowers and defenders of human rights abroad.
My view is that new clause 7 is not as robust as new clause 1, mainly because it does not impose a duty on UK law enforcement agencies to act subject to the flexibility I described, and it omits the third-party application procedure and removes the public register. In each of those three cases, I understand and recognise the Minister’s reasons why that is the Government’s position—it is probably to be expected—and I do not want to let the best be the enemy of the good, but I retain at least a measure of underlying concern. My concern touches on something that is so often the case with criminal justice legislation: the extent to which the new power will be enforced in practice. The hon. Member for Rhondda (Chris Bryant) touched on that, and the concern is probably shared across the House.
If I may be so bold, I would like to elicit some further reassurances from the Minister—which he may feel free to indicate during my speech or his winding-up speech—on the issue of enforcement. First, will he commit to the Government to collecting data on the exercise of the new clause, say, annually, so that the House and the public can properly scrutinise the extent to which it is being exercised in practice? I recognise and understand the Minister’s point that the success of the clause should not be judged only by how many times it is exercised but by its deterrent effect, but I still think that would be a valuable source of reassurance.
Mr Wallace
I am delighted to tell my hon. Friend that I will commit to collecting those stats and ensuring that they are published annually alongside other stats on the proceeds of crime.
Mr Raab
I thank the Minister for such an immediate, swift and decisive acceptance and provision of assurance. That would be extremely useful. There is only one other aspect on which it would be useful to have some reassurance. I understand that there is a wider ongoing review of UK-wide asset-freezing powers. I can well appreciate why the Government may be reticent about reinventing a bespoke procedural mechanism for one new power, given its relationship with other wider proposals that may be forthcoming, but I hope that the Minister will undertake to factor the proposals made in new clause 1 into the review process and to ensure that any future new proposals on enforcement include the most robust and rigorous mechanism available under UK law applying to new clause 7. If the Minister can give that assurance on top of the one he has just given, I am inclined to accept new clause 7 and to not press new clause 1, heartened by the Government’s commitment to strive to make the new power work as effectively as possible in practice.
For those of us who have campaigned for change, there remains the further issue of visa bans, but that is for another day. Today, the House has the opportunity to lay down some moral red lines in UK foreign policy and to take a lead in denying safe haven to the dirty money of those profiting from the most appalling of international crimes.
Mr Djanogly
My hon. Friend says that visa bans are for another day, but of course visa bans already exist as a possibility. Would it not be helpful to know how the existing visa ban system will complement the new proposal?
Mr Raab
My hon. Friend is absolutely right. We will need a separate legislative vehicle to address the wider question of visa bans, but he makes his point and has been tenacious in powerfully campaigning for this. We will want to move on to that issue at the appropriate time. Today is really about the asset-freezing side of things. We have in this last analysis the opportunity to send a message of solidarity to those who are fighting for the liberty that we in this country hold so dear. We have the opportunity to nurture the flame of freedom on behalf of those brave souls, such as Sergei Magnitsky, who suffered the very worst crimes when standing up for the very highest principles.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
As I rise to speak to this group of amendments, it looks as though new clause 1 might not be moved in favour of Government new clause 7. The Minister started by saying that the Bill has so far enjoyed a degree of cross-party consensus in its parliamentary passage, so I would like to say that Her Majesty’s loyal Opposition will not stand in the way of new clause 7 and will not stand in the way of new clause 1 if it is moved.
I welcome new clauses targeting asset seizure for those guilty of human rights abuses outside Britain who seek to use the UK to conceal their wealth. New clause 1 has become known colloquially as the Magnitsky amendment, and we have heard some of the tragic details of that case. It would bolster the Bill’s aim to tackle the growing concern about money laundering, terrorist financing and corruption. The International Monetary Fund and the World Bank estimate that the annual loss through money laundered globally is between 2% to 5% of global GDP—a staggering $800 billion to $2 trillion. We do not know the true figures because this is all hidden, white-collar crime.
It is estimated that serious and organised crime on our own doorstep costs the UK economy at least £24 billion annually. The amount of money laundered here every year is between £36 billion and £90 billion. That is a loss to our Exchequer, so it is only right that we tighten up the legislation with this Bill, and such an amendment would tighten them up further. Quite simply, those who have blood on their hands from the worst human rights abuses should not be able to funnel their dirty money through our country. In a recent article in The New York Times, the journalist Ben Judah uses quite colourful language to attest:
“Just because there aren’t bodies on the streets of London doesn’t mean London isn’t abetting those who pile them up elsewhere. The British establishment has long feigned ignorance of the business, but the London Laundromat is destroying the country’s reputation.”
Under new clause 1, the names of individuals who have been involved in or profited from human rights abuses would be published, and Ministers would be obliged to apply for a freezing order of up to two years if they are presented with compelling evidence of abuse and it is in the public interest to do so. That would make dictators and despots think twice about using the UK as a safe place to stash their dirty cash. By creating personal costs for the perpetrators of human rights abuses, we can protect whistleblowers around the world, which would be a fitting tribute to the legacy of Sergei Magnitsky.
Mr Djanogly
I am pleased to be given the opportunity to speak to this significant legislation, which will certainly help the overall objective of stopping the UK being used as a safe harbour for illegal proceeds, as it currently is all too frequently.
Mr Wallace
Perhaps I can inform my hon. Friend and the rest of the House on the visa issue. We can refuse a visa to a person who does not meet the immigration rules. Evidence that a person has been involved in organised crime or in human rights abuses or violations would be taken into account when considering a visa application. We can already do that; the power is there with the Government, and we have exercised it in the past.
Mr Djanogly
I am grateful for the Minister’s clarification. It would be helpful if he could say that it is the Government’s position that, when a prosecution is taken under these new provisions, the court should consider a visa exclusion automatically and not as a possible add-on.
Clearly, if the sanctioned person had his or her assets confiscated but could then go on to buy more assets or to conduct business in the UK, new clause 7 may lack the required teeth.
New clause 7(5) refers to proceedings needing to be brought within 20 years, which seems like a short period in any event. Furthermore, it looks to be 20 years from the commission of the gross human rights abuse. Why is it not from the end of the abuse? In other words, if someone has been abused for 20 years plus one day, would the right to prosecute the abuser fail?
Would the court be required to connect the human rights abuse to the assets being seized? For instance, where the individual is accused of organising the torture of three people but steals from only one of the three and then moves the stolen goods into the UK, would the seizure have to be tied to the one incidence of torture that relates to the stolen goods?
My final question is this: after the legislation is put in place, do the Government actually intend to act? Many foreign nationals—not least Russians—really want to live here, rather than in, say, the US, so we have significant influence in setting the standards of civilised behaviour we expect from people who live or stay here. I ask the Minister, as I think my hon. Friend the Member for Esher and Walton did, whether we are now going to say to those who have been merciless in their own countries and who then look to store their ill-gotten gains in the UK, “We do not want you here. We do not want your money here”, and, importantly, “If you do come here, we will act.” If that is the Minister’s position—I think he said it was, but perhaps he could clarify that—I am minded to support Government new clause 7 rather than new clause 1.
Chris Bryant
I want to pay tribute to two people, the first of whom is the Minister for introducing this Bill. I think we all accept, in all parts of the House, that the corrupt money that swishes around in the British financial system is part of a type of crime and corruption across the whole world. Unfortunately, it also has a very detrimental effect on the housing market in the UK in that large numbers of houses are bought not to live in but as an investment vehicle and a means of laundering money. While some of those properties are at the high end of the market and there might be no effect on the majority of our constituents, in some cases these people have been buying property portfolios all the way down the housing market—and by increasing the value of the top end of the market they are affecting the whole market. If we want to get serious about the housing market in this country, we have to tackle the issue of corrupt money in the British system coming from overseas. I welcome the main provisions of the Bill. I applaud the Minister for trying to get some way towards a provision that might be termed the Magnitsky clause, as he suggests in his new clause 7.
I also pay tribute to the hon. Member for Esher and Walton (Mr Raab). He and I have had very many conversations on this subject for a long time, but we still have not managed to decide how to say the name “Sergei”. One of the most depressing things to add to the long list that he outlined is that Sergei Magnitsky was prosecuted posthumously, which must be a new low in putting two fingers up to the normal standards of criminal prosecution around the world.
I am absolutely certain that significant numbers of the people who are prohibited from entering the United States of America under the Magnitsky list have entered the United Kingdom since his death. That is why the Minister really needs to think again about visa bans. I do look to the United States of America in this regard. Several hon. Members, including the hon. Member for Huntingdon (Mr Djanogly), have already said that the United States of America has gone much further than we have. The Minister tried to argue that the Americans have a very different legal system. Yes, they do, but it is based on the same fundamental principles as ours and, I would have thought, on the same values as ours. That is why we ought to be going at least as far as the United States of America. When the Commons debated this on 13 December 2010, the motion stating that we should proceed with a Magnitsky Act was carried unanimously. The Minister at the time, who is a thoroughly charming chap, said that we had to wait to see what the United States of America does. Well, I think we have all decided that we are not going to wait to see what the United States of America does on anything at the moment, and we might choose to set our own path in relation to these matters. I sometimes feel as though the UK is dragging its heels on this issue.
Sergei Magnitsky was killed just before 2010, when I was Minister for Europe in the Foreign Office, and most of the debate about this has happened since then. My personal perception was that both David Cameron and President Obama were very reluctant to show a strong arm to Russia because they thought that by pressing the reset button—this was Obama’s view—we would somehow manage to get major concessions out of Putin. That has not proved to be an effective strategy. In every single regard, Putin has simply taken those moments as a sign of weakness and proceeded to use force to a greater degree. On the day that David Cameron became leader of the Conservative party, the first thing he did was to go to Georgia to stand with the Georgians against Putin’s invasion of that country. Yet there are still Russian troops in Georgia, and since then we have had the issues in Ukraine.
There is now clear evidence of direct Russian corrupt involvement in elections in France, in Germany, in the United States of America, and, I would argue, in this country. Many believe that some of the highest-level decisions affecting security in the United Kingdom, in Germany, in France and in the United States of America are now compromised by Russian infiltration. The murder of Sergei Magnitsky and his then being posthumously put on trial shows that Russia is, in effect, a kleptocracy—a country ruled by people who have stolen from the people and used every means in their power to protect themselves and guard their position with jealousy. It is, in essence, the politics of jealousy writ large. I fear that this has infected the United Kingdom, and also one of our closest allies in Europe, Cyprus, where much Russian money is currently stored away corruptly and laundered illegally.
Sir Eric Pickles
It is a great pleasure to follow the hon. Member for Rhondda (Chris Bryant). I agred with much of what he said—some I did not, but we will put that to one side for a moment.
I congratulate my hon. Friend the Member for Esher and Walton (Mr Raab)—never forget Walton in his patch—because he has achieved enormous progress. When he started this process, I did not think that he had a chance of getting his measure through, but the Government have made quite an unusual concession, if the Minister does not mind my saying so. Usually concessions arise out of panic about defeat, but I do not think that there was any possibility of that. This concession is due to the power of my hon. Friend’s arguments about righting a wrong and including in British law something that I think will make a difference. I am sure that the House is grateful for what he has done.
I stand before you, Madam Deputy Speaker, as the UK Government’s champion on anti-corruption. When I was appointed by David Cameron, I came out to find that he had described me as the anti-corruption tsar. The Daily Mirror shortened that to corruption tsar, and I felt that that was one step too close to the Romanovs, so I am happy to use the word “champion”.
In that capacity, I went to an Organisation for Security and Co-operation in Europe anti-corruption conference in Paris. One of the speakers talked about taking a lorry full of time-sensitive goods through customs and being asked for a private facilitation payment. They asked how many of the people present would make such a payment. To my amazement—and, I suspect, to the greater amazement of the person who asked the question—a good 60% of hands went up. I was proud to say that if that lorry driver had been British, not only would he have committed a crime, but he would have been prosecuted for it on his return to the UK and so would his company.
New clause 7 and the excellent new clause 1 have to be seen in that context. We have been gradually triangulating this crime. I am old enough to remember listening to a Minister—a Conservative Minister, I am ashamed to say—saying on the radio a number of years ago, “I want British companies to bribe. Everybody bribes, and I want Britain to be among those that do so.” That was a ludicrous thing to say, but it was the kind of reaction that we got to the Bribery Act 2010. People said, “Everybody’s doing it. All we are doing is putting British companies at peculiar risk.” That has not been the case. Because of the Bribery Act, board members have put in place due diligence to ensure that they do not face that problem. That was part of the process of triangulating the crime, and I do not think that there has been any drop-off for British business. The new clauses have to be seen in the context of the call for consultation on economic crimes and the place of boards in relation to economic crimes. They should be seen in the context of transparency over beneficial ownership of property in this country by those who want to trade with the Government, and I hope to see something positive come out of that.
Given the degree of consensus that seems to be breaking out about the proposals, I will make a slightly shorter speech than I intended. New clause 7 should help us to deal with bloodstained dictators and those on the take in kleptocracies around the world. I entirely agree that a posthumous conviction for dishonesty and theft is as ridiculous as the practice during the French revolution of putting animals on trial. We have to understand that there are parts of the world in which Governments and private business move hand in hand, and they make the Tudor court look like the epitome of puritan restraint. To those people, we are sending out a clear message that their assets will be seized and their lives interrupted, and that those who seek to buy expensive flats and jewellery will face a problem.
We have dealt with the worry about third parties making vexatious claims. I will not go over that again, but a further point needs to be emphasised. Non-governmental organisations, especially, often play an enormous part in getting prosecutions together and bringing evidence to the authorities. I have had the privilege, as I suspect the Minister has, of seeing how the Serious Fraud Office works. A lot of its cases are complex and take a lot of time, and there is a risk that if third parties were allowed to make applications, they might actively tip off those involved in an ongoing investigation. That is another compelling reason why states, and more particularly prosecution authorities, should bring such cases.
Tom Brake
I thank the hon. Member for Esher and Walton (Mr Raab) for putting together the proposal in new clause 1 and the Minister for responding positively. I have been in the House for long enough to know that Ministers rarely respond positively to approaches, even cross-party ones, so it is welcome that the Minister has taken on board the spirit of the proposal. I also pay tribute to Bill Browder—many Members in the Chamber will have met him—who has really led the charge on this issue. However, I am sure that Bill wants not a tribute but action.
I share some of the reservations of the hon. Member for Rhondda (Chris Bryant). In other countries, assets have been seized in relation to the Magnitsky case, but it seems that that is not so in London. Many Members would accept that London is a place where many Russians, sometimes of rather dubious backgrounds, like to put their assets, so it seems strange, while assets are being seized almost everywhere else around the world in relation to this case, for London to be the one place where they have not been seized.
The Minister reassured us that the prosecuting authorities—of course he cannot put pressure on them, but he has confirmed this—would prosecute if there was evidence. I assure Bill Browder and others that they will have the support of the House if evidence—or further or more detailed evidence—is forthcoming, as the Minister for one endorsed the need for very firm action. He said that action might be taken under existing legislation, but that it could be taken even more effectively under Government new clause 7.
Like other Members, I would prefer new clause 1 to the Government’s proposal, but I understand why the Minister preferred to table his own new clause. Unfortunately, I suspect that we would not have the numbers in the House to win a Division today on cross-party new clause 1. We will therefore have to follow the matter very closely, and I welcome the fact that the Minister will publish statistics.
Several hon. Members referred to the Magnitsky Act. If they want to see the list of names, they could read my early-day motion 1344—it has been signed by a number of Members—which lists Russian citizens subject to the Magnitsky Act in America. The hon. Member for Rhondda reminded me that I need to retable my early-day motion because, as he said, new names have been added to the American list. The information is there if Members need to refer to it.
I welcome the fact that the Government have moved on this issue, but the proof of the pudding will be in the eating. If evidence is forthcoming that such assets are in this country, in the way that Bill Browder and others believe is the case, the Government must ensure that those responsible are prosecuted and brought to justice for the gross human rights violations they have committed.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
I, as a signatory of new clause 1, can be very brief because my right hon. and hon. Friends, and indeed Opposition Members, have made the case with such eloquence on what is known as the Magnitsky amendment. It seems to me, as such a signatory, that the Government have listened. The Minister has quite rightly heard the cross-party voice on these issues and tabled new clause 7, and I certainly congratulate him on having achieved that.
My hon. Friend the Member for Esher and Walton (Mr Raab), who has done such a good job on this issue, pointed out, in accepting the Government new clause, that we must not allow the best to be the enemy of the good. The story that my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles), the anti-corruption tsar, told us about his Paris meeting reminds me of just how complex is the attack on corruption, of which we must all be a part.
I remember a very eminent New York anti-corruption lawyer, who had been involved in a variety of anti-corruption mechanisms, telling me that he was once invited to Afghanistan to give a lecture on how to tackle corruption, and a vast number of Afghan officials turned up in the auditorium. To his horror, observing the Rolex watches on the wrists of so many of those officials, he suddenly realised halfway through the lecture that they had turned up to learn not how to tackle corruption, but how to evade the tackling of corruption.
Corruption is a cancer: it is insidious in a whole variety of ways. One of the good things about the Bill is that it seeks, in a very complex area, to make progress on some very clear aspects of the issue. The former Prime Minister, the former Chancellor of the Exchequer and other Government Members have also made a very big contribution in the fight to tackle corruption in this area.
I want to make two brief final points. The first is that in the Magnitsky case, as I think the Minister has recognised—I know Bill Browder and I was absolutely horrified to hear the tale of the experience he has undergone—it is clear that the British law enforcement agencies have shown, to put it no more strongly than this, a degree of confusion, delay and obfuscation in their handling of such matters. There are issues of administrative co-ordination and effectiveness, and I very much hope that the Minister ensures that tackling this issue remains clearly on his agenda.
My second and final point is that Britain needs to send a very clear signal about the approach we take to human rights abuses and money laundering. The failure to send a very clear signal—I hope that that will be ended by the decision the House will take this afternoon—damages our international relations. Britain’s relations and dealings with Russia are very complex. We need to work with Russia on a number of matters on which we have a common interest, but we also need to be absolutely clear where we stand on the issues—my hon. Friend the Member for Huntingdon (Mr Djanogly) set them out so eloquently in his speech—so that there is no misunderstanding about where the British Government stand on many of the horrific aspects of Russian governance and conduct. I have been a strong critic in this House of Russian abuses of human rights and, indeed, of war crimes in Syria. Given the other dimension of areas on which we must be able to work constructively with Russia, it is extremely important that we in this House are absolutely clear with the Government about where we stand on human rights issues.
Mr Wallace
We have had a very important and well-informed debate. I am very grateful to colleagues for their contributions, in particular my hon. Friend the Member for Esher and Walton (Mr Raab). As Minister, I have done my best throughout the process to speak to as many colleagues as possible and to listen to their concerns. I have gone back to the law enforcement agencies and asked them tough questions. I cannot say whether my predecessors did that or not, but I take the view that our job as Ministers is to go beyond the briefing papers we all receive, test their resolve and send a very clear message. I have told the agencies that when the Bill is passed by Parliament and becomes an Act, we want to see prosecutions and we want the powers to be used. I will not interfere in how they choose to apply those powers, and I will not choose which powers they use to achieve the right effect.
The main aim is to ensure that we say loud and clear that we do not want money launderers in this country. We do not want organised criminals. We do not want those who abuse people through torture and inhumane treatment. We want to say, “You are not welcome in this country and nor is your dirty money. If you come to this country, we will try to have you and we will certainly try to have your money. If we can return that money back to the regimes it has been stolen from, we shall do that.” We have already started that process by returning £27 million to Macau recently and signing a memorandum of understanding with Nigeria. If we can do that, we will. Both Government new clause 7 and new clause 1—there are many things I agree with in the spirit of new clause 1—say that loud and clear. I think that our new clause will help to achieve that in relation to the people who want to exploit laws around the world, whether through immunities, state sponsorship, state umbrella or tacit support.
I highlighted to my hon. Friend the Member for Esher and Walton that annual reporting will cover the use of this provision. The Government have already agreed, in our response to the Public Accounts Committee and the Home Affairs Committee, to publish a set of annual asset recovery statistics. As I made clear in Committee, it will cover the annual use of unexplained wealth orders. I am also pleased to commit today that it will include the use of this provision.
Mr Djanogly
Will it also include the names and titles of people from whom the assets have been taken?
Mr Wallace
I will have to check and get back to my hon. Friend, but any court action is a matter of public record. If someone is prosecuted under the Proceeds of Crime Act 2002 or has their assets frozen, that will become a matter of public record available to all—that is very important.
To reiterate the point about sanctions, the Government are undertaking an assessment of existing sanctions policy post-Brexit to ensure we can continue our proactive approach. It is right that any changes to our sanctions regime are considered in that context, rather than making changes at this point. We will of course continue a dialogue with parliamentary colleagues on this work, and I will absolutely ensure that the spirit of new clause 1, tabled by my hon. Friend the Member for Esher and Walton, is carried forward in those discussions. The time to do that, however, is not with this legislation; it is when an assessment is made post-Brexit to consider sanctions in the wider picture.
I want to talk about the duty of law enforcement agencies to use the powers. Part of the rule of law and the strength of our system, as opposed to perhaps some other regimes we have talked about today, is that our agencies are operationally independent. As a Minister, I do not sit behind a desk and use the agencies to pick on people or political rivals I do not like. We leave the agencies, as much as possible, to be operationally independent. That is a part of the balance and safeguards in our society.
Chris Bryant
But if the prosecuting authorities were, for a corrupt reason, to choose not to prosecute, there are powers, through the courts, to ensure that they do so.
Mr Wallace
I am afraid I have too positive a view of the integrity of our law enforcement agencies to say—or even allude to the fact—that there could be some corrupt reason they may not use their powers. We all have constituents who write to us and say, “I made a complaint to the police and they didn’t take any action.” Sometimes that is valid and we try to get a better result for them. Hon. Members who have met Bill Browder have brought their evidence to this House and made representations to the National Crime Agency. They cross-examined a National Crime Agency witness in Committee. However, we also have constituents who do not like the outcome of their complaint—that a crime has not been judged to have been committed. That is a disappointment they sometimes have to live with and it is our job as Members of Parliament to tell them, “I’m afraid it does not constitute a crime.” Sometimes the police have to make that case. Sometimes constituents may seek to deal with that by changing the law to create a crime that may be appropriate or up to date. However, it is important to respect operational independence, tempting as it may be sometimes to wish to reprioritise their priorities to suit the issue of the day.
Mr Wallace
I really do have to press on. Hon. Members have made a considerable number of valid queries and I have a small book, handed to me from the Box, to get through.
The hon. Member for Dumfries and Galloway (Richard Arkless) raised a number of issues relating to the unlimited nature of retrospective offences. Torture is an offence where the UK applies universal jurisdiction. On that basis, the provisions are retrospective in so far as they relate to torture, even where it occurs prior to the enactment of the Bill. However, the Government new clause would cover conduct constituting cruel, inhumane and degrading treatment only after the Act comes into force.
We have already taken significant legal steps to suspend the requirement for dual criminality; that is, providing for civil recovery to be pursued against property not necessarily unlawfully obtained in the country in which the conduct took place. We think this is a suitably proportionate approach. We have already gone further than we do in some other areas. We can take action where the unlawful event took place when it was not in this country. That is something we have to balance.
The recovery of proceeds of crime is generally subject to a 20-year limitation period under the Limitation Act 1980. The hon. Members for Rhondda (Chris Bryant) and for Dumfries and Galloway asked about the timescale for claiming the proceeds of crime. Under POCA, it starts when the property is obtained through unlawful conduct. Under new clause 1 it seems to run from the date of the conduct itself, so that could possibly mean a shorter timescale than that under Government new clause 7. I reassure the hon. Member for Dumfries and Galloway that new clause 7 covers conduct linked to torture, such as: assisting it, directing it, facilitating it or profiting from it even when that linked conduct is not conducted by a public official. It therefore goes wider than some have feared.
We must also consider what evidence is needed to allow for assets to be recovered. Any civil recovery would be subject to all existing processes and legal safeguards in the Proceeds of Crime Act. The court would need to be satisfied, on the balance of probability, that the property in question was the proceeds of crime or was likely to be used to fund further criminal activity. Law enforcement agencies would, as ever, need to consider which of their powers to utilise on a case-by-case basis. It would also apply to inherited wealth. That would not be excluded. Inherited wealth would be covered by the ability to recover assets, so I hope I can reassure the hon. Member for Rhondda on that point.
I reiterate to my hon. Friend the Member for Esher and Walton that the Government agree with the spirit of his new clause. We want to say loud and clear that organised criminals, crooks and corrupt individuals are not welcome in this country, and neither is their money. I was pleased to contribute to the implementation of the Bribery Act 2010, introduced by the last Labour Government, and its statutory guidance, under the previous Conservative Government. That is part of this whole package: the Bill comes alongside the Bribery Act and some other measures. I do not want London and the UK to be fuelled by dirty money, and I do not want people to be profiting from it. One of the best ways of making London and the UK open for business is through the rule of law—and, I would say, a competitive tax base. People should want to come to the UK for those reasons, not because they can hide or launder their money. It does not make us a better host for these individuals. I hope that the new powers in the Bill will help us tackle the problem, and I am keen to ensure that upon its enactment we start to deal with these individuals and get the money back to where it belongs.
There was little in the well-articulated speech of my hon. Friend the Member for Huntingdon (Mr Djanogly) that I did not agree with. He is absolutely right about sending a message. There are regimes around the world that deliberately take advantage of Britain’s openness, the quality of places to live and what we have to offer, and they need to be sent a message that we are serious and that they should go elsewhere—although we would like to catch them first and put them in prison, to be brutally honest.
I think I have clarified the point from the hon. Member for Rhondda about inherited wealth. On the worries about the London property market, I must add that it is not just nice townhouses in Knightsbridge being bought up, but huge portfolios up and down the country, and it does not just apply to overseas citizens either. For instance, other parts of the Bill deal with drug dealers, including those in my part of the world, in the north-west, the north-east and Northern Ireland, funnelling money into property.
As part of the Government’s work on the implementation of the fourth anti-money laundering directive, they have consulted on whether estate agents should carry out checks on the buyers of properties as well as the sellers. I was surprised, as I suspect were colleagues, to find out that currently they only carry out such checks on sellers. We intend to publish the response to the consultation “imminently”—that is what my note says—and I think that we will all be looking at it carefully.
The hon. Gentleman also asked about freezing orders and people quickly moving the money. Part 5 of the Proceeds of Crime Act 2002 provides for interim freezing orders, allowing for the freezing of property while the courts consider the case. I recognise that the Home Affairs Committee report on the proceeds of crime and the recovery of assets pointed out some valid problems in the system, however, and I have asked that the Department set about being timely when making cases for the confiscation of funds and assets so that the gaps do not allow criminals and bad people to move the money beforehand.
The hon. Member for Rhondda and my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles), the anti-corruption tsar, will recognise that within Government we always have to satisfy the competing concerns of Departments. They will both know—the hon. Gentleman was a Foreign Office Minister and my right hon. Friend is a former Secretary of State for Communities and Local Government—of the competing interests within Government when it comes to legislating, and inevitably amendments have to walk a fine line between several challenging diplomatic and political issues, but I trust that the House agrees that the Government have taken a constructive approach. I have been determined to listen to colleagues and produce something that sends a strong message while also providing powers to allow us to act against people who abuse human rights.
I want to finish by congratulating my hon. Friend the Member for Esher and Walton on tabling new clause 1. It was important that we have this debate. He is a formidable campaigner and has successfully articulated the case and imbued the Bill with the spirit of his new clause. I hope that the House will support Government new clause 7.
Question put and agreed to.
New clause 7 accordingly read a Second time, and added to the Bill.
New Clause 8
Her Majesty’s Revenue and Customs: removal of restrictions
‘(1) The following provisions, which impose restrictions on the exercise of certain powers conferred on officers of Revenue and Customs, are amended as follows.
(2) In section 23A of the Criminal Law (Consolidation) (Scotland) Act 1995 (investigation of offences by Her Majesty’s Revenue and Customs), omit the following—
(a) in subsection (2), the words “Subject to subsection (3) below,” and the words from “other than” to the end of the subsection;
(b) subsection (3).
(3) In section 307 of the Criminal Procedure (Scotland) Act 1995 (interpretation), omit the following—
(a) in subsection (1), in paragraph (ba) of the definition of “officer of law”, the words “subject to subsection (1A) below,”;
(b) subsection (1A).
(4) In the Proceeds of Crime Act 2002 omit the following—
(a) in section 289 (searches), subsections (5)(ba) and (5A);
(b) in section 294 (seizure of cash), subsections (2A), (2B) and (2C);
(c) section 375C (restriction on exercise of certain powers conferred on officers of Revenue and Customs);
(d) section 408C (restriction on exercise of certain powers conferred on officers of Revenue and Customs).
(5) In the Finance Act 2007, in section 84 (sections 82 and 83: supplementary), omit subsection (3).”
This new clause, together with amendments 20, 25 and 28, removes restrictions on the exercise of certain powers by HMRC officers. The restrictions prevented the powers being exercised in relation to certain former Inland Revenue functions.—(Mr Wallace.)
Brought up, and read the First time.
Madam Deputy Speaker (Natascha Engel)
With this it will be convenient to discuss the following:
New clause 5—Unexplained Wealth Orders: award of costs—
“In Chapter 2 of Part 8 of the Proceeds of Crime Act 2002, after section 362H insert—
‘362HB Unexplained Wealth Orders: award of costs
(1) Pursuant to Part 3 of the Civil Procedure Rules (The Court’s Case Management Powers) the High Court must make a costs capping order, in respect of—
(a) unexplained wealth orders under section 362A of this Act;
(b) interim freezing orders under section 262I of this Act.
(2) The High Court shall not have power to make an award for costs on the indemnity basis against enforcement authorities who bring an unsuccessful application for—
(a) unexplained wealth orders under section 362A of this Act;
(b) interim freezing orders under section 262I of this Act.
(3) For the purposes of this section “enforcement agencies” has the same meaning as in subsection 362A(7).’”
This new clause would prevent the courts from awarding uncapped costs on the indemnity basis against enforcement agencies where they have brought unsuccessful applications for unexplained wealth orders or interim freezing orders. It seeks to define such civil actions as within “exceptional circumstances” required for the purposes of Practice Direction 3F to Part 3 of the Civil Procedure Rules under which the court has the power to make a cost capping order.
Amendment 1, page 3, clause 1, leave out line 29.
This amendment would allow unexplained wealth orders to be issued to politically exposed persons in the United Kingdom and EEA States.
Government amendments 2 to 19.
Motion to transfer clause 12(3).
Government amendments 20 to 57 and 60 to 72.
Mr Wallace
We now come to a group of amendments relating to law enforcement investigative and recovery powers. It is primarily composed of Government amendments that I hope the House will agree are, for the most part, technical and uncontroversial. I therefore do not intend to linger on each of them, but I will quickly summarise the key amendments for the benefit of hon. Members.
New clause 8 and other consequential amendments remove the restriction on HMRC’s criminal powers being used for former revenue functions. This ring fence arose following the merger of Her Majesty’s Customs and Excise and the Inland Revenue in 2005. In the intervening period, legislative changes have brought most major taxes within the scope of HMRC’s criminal justice powers, but there remain some anomalies. For example, investigators cannot use certain powers to fight stamp duty tax fraud. Fraud is a crime, regardless of which function of HMRC it is committed against, and the amendments will ensure that the necessary powers are available in all such cases. They do not provide HMRC with any new criminal justice powers.
Amendments 2 to 15, 70 and 71 relate to the power in clause 9 to allow an extension of the moratorium period in which law enforcement agencies can investigate a suspicious activity report before a transaction is allowed to proceed. These amendments will deliver a number of minor and technical improvements to this provision: they will allow an automatic extension to the moratorium period while a court hearing is awaited to make a decision on an application; they will help to ensure that a company does not provide any information to the customer whose transaction is subject to a suspicious activity report, other than the fact that an SAR has been made; they will allow immigration officers to apply for an extension; and they will allow for an explicit right of appeal in Northern Ireland.
The majority of the remaining amendments in this group—amendments 22 to 24, 26, 27, 29 to 38, 46, 47, 49 to 57, 60 to 69 and 72—clarify the operation of the seizure and forfeiture powers that the Bill adds to the Proceeds of Crime Act 2002 and the Anti-terrorism, Crime and Security Act 2001. Many of these changes are extremely technical in nature, but I will highlight a few of the more significant ones. They will allow the director general of the National Crime Agency to designate the level of senior officer that can authorise the use of certain powers—unlike in the police, no such designation currently exists in law. They will ensure that any interest accrued on forfeited funds while in the agency’s account is returned to the owner of the funds if that person successfully appeals against the forfeiture. They provide that, where the NCA has used the powers, and a court determines compensation should be paid, the NCA will be responsible for paying that compensation. They will introduce a duty on the police and others to consult the Treasury to ensure that the full range of terrorist asset-freezing powers are considered before exercising the related power provided by the Bill. They will require consultation with the devolved Administrations before the provisions in clause 12 relating to the seizure of gaming vouchers and betting slips are commenced. This will ensure that the provisions are implemented effectively in Scotland and Northern Ireland.
On the devolved Administrations, we hope the Scottish Parliament will approve their legislative consent motion on the Bill shortly. Although the Government assert that none of the provisions are devolved with respect to Wales, I note that the Assembly has already provided such a motion. The Government have had extensive discussions with the Northern Ireland Executive about the Bill, and plans were in place for a legislative consent motion to be considered by the Assembly—law enforcement authorities in Northern Ireland are keen to ensure they have access to the powers in the Bill—but the suspension of the Assembly prior to elections has prevented the motion from being pursued at this time. These are clearly extremely unusual circumstances, but the Government remain committed to the central principles of the Sewel convention. We will therefore commit not to commence provisions on matters devolved to Northern Ireland without the appropriate consents having been obtained. It is our intention to pick this up with the Executive, following those elections. It may not be possible to resolve this before the Bill receives Royal Assent. We are most likely to make further amendments to the Bill in the House of Lords to put beyond doubt that all the relevant provisions can be commenced at separate times for different areas of the United Kingdom.
Gavin Robinson (Belfast East) (DUP)
The Minister will be aware that although the aspiration is to see an early return to the Stormont Executive, the likelihood of that happening in the immediate future is somewhat fraught. Given that the Bill will inevitably conclude before we see the return to the institutions of Stormont, will he outline what steps will be taken to regularise issues, once the Assembly has been restored?
Mr Wallace
We are in ongoing discussions with the Northern Ireland Assembly, and we hope that the Northern Ireland Assembly elections are completed and that Stormont takes up the reins again, so that devolution returns to Northern Ireland. That is our starting-point, and it is what we all wish. There was a good cross-party consensus for these provisions for Northern Ireland in the Assembly earlier. I cannot remember the exact date of the election—the hon. Gentleman might have to remind me. Let us plan for normality in Northern Ireland and make sure that we get to a good position.
Gavin Robinson
The election is planned for 2 March. I agree with the aspiration to see a return to Stormont as soon as possible, but does the Minister believe that there would be some merit in at least corresponding with the leaders of each political party to attain affirmation of the measures at this stage, for fear that we do not see a return in a reasonable period?
Mr Wallace
I am grateful to the hon. Gentleman, and I will certainly put that suggestion to officials. My view would be that pre-suspension of the Assembly is the place we are at, and although there has been a change of a leader, I am not sure that we have had any signal that it has gone backwards. The date of 2 March gives me some good hope. I have never known the other place move at the speed of light, so I hope we shall have time to make sure that this gets through.
Finally, this group includes two proposals concerning unexplained wealth orders: new clause 5, in the name of a number of the officers of the all-party parliamentary groups on anti-corruption and responsible tax, and Opposition amendment 1. I will allow hon. Members the opportunity to speak to those amendments and will respond to them in my closing remarks.
Carolyn Harris (Swansea East) (Lab)
The Opposition support the spirit of the Bill and broadly support this group of amendments. We welcome new provisions to prosecute those professionals who fail to prevent tax evasion, as well as welcoming unexplained wealth orders, under which assets can be seized if owners are unable to explain how they were funded. We, of course, support the Government’s effort to tighten up state powers against white-collar crime, but we have concerns that they are squandering the opportunity that the Bill provides to stamp out the everyday corruption of the super-rich who are getting a free ride at the expense of the wider society, thereby fuelling inequality.
Another problem is that, amid the Government’s cuts to public services, the Bill could be very difficult to enforce. Although I understand the giving of new powers to HMRC, are the Government not concerned about how HMRC will carry out its new duties? Given that the coalition Government decimated HMRC’s budgets by £100 million and that HMRC is set to lose 137 of its offices by 2027, there seems little point in creating laws that cannot be enforced—unless, of course, it is to give the impression that the Government are doing something. This, I fear, is a theme that has sadly run through our proceedings on the Bill so far.
We Opposition Members argue that it is crucial for the agencies involved in civil recovery powers to have sufficient resources to do their jobs properly. We therefore request a distinct and clear annual report that details the resources allocated to the agencies that are concerned solely with the task of carrying out these recovery powers.
In previous stages, the Government objected on the grounds that the asset recovery incentivisation scheme would allow frontline agencies to keep 100% of what they recover, but this argument is seriously flawed. In theory, yes, the agencies could retain the total value recovered, but as the Public Accounts Committee made clear in its progress review of confiscation orders and as the Home Affairs Select Committee made clear in its review of the Proceeds of Crime Act 2002, these agencies’ recovery rates have been typically poor. Consequently, it remains to be seen how these agencies will improve their rate of recovery to benefit from the new incentivisation scheme.
Another reason that the Government gave is that anyone who wanted to find out this information could in theory obtain it by going to a number of different sources. Yet again, this is flawed. We previously argued for a detailed reporting of resources, specifically for these agencies, in the exercise of the powers laid down in the Bill and the Proceeds of Crime Act 2002.
The Government have already blocked a number of measures that Labour has proposed to make this a meaningful and effective Bill. We proposed a corporate probation order. If a company was found to have committed a failure to prevent offence, it would have been subject to an independent review of its compliance procedures and it would have had to pay the full costs of such a review. This was coupled with allowing for the removal of directors from companies who failed to ensure that proper procedures were in place to prevent UK and foreign tax evasion offences from taking place. The Government believed that this was unnecessary because UK law could already deal with such cases of negligence. Although there may be a case for some UK law to be used to a similar effect, it would not be an identical effect.
While there is an implied threat to the EU that the Government could change the UK’s economic model into one of a tax haven, there is a strong case for legislation to protect both UK citizens and citizens from around the world. With the potential for a race to the bottom and the destruction of workers’ rights and the slashing of corporation tax, it could be argued that a Brexiteer Government would foster an environment where tax evasion was implicitly encouraged.
As my colleagues have said, and will no doubt say again, the Bill must do more to tackle the deeply entrenched and extraordinarily costly phenomenon of tax avoidance. Tax avoidance is, in effect, living to the letter of the law, but not in the spirit of the law. Repeated investigations of companies that sail close to the wind but know that they have bought the lawyers and accountants to make their tax abuse legal is both very frustrating and extremely costly. As the UK general anti-abuse rules show, there are ways to minimise the risk of corporate abuse of the tax system, and these should be absorbed into the Bill.
Spain, Canada and Australia each have a single agency responsible for supervising and enforcing anti-money laundering regulations—Britain has 22. Worse still, according to Transparency International UK, 15 of these 22 supervisors also lobby on behalf of the interests of their sector, creating clear conflicts of interest and a system inefficient to its core. The Government raised this problem in their action plan that preceded the Bill, but they were not concerned enough to convert this into proposed legislation. The system needs reform and the Bill needs to reflect this. Unless the Government accept all these concerns and indeed all the changes suggested in the Opposition amendments, the Bill is likely to fail on the intention to clean up money laundering and tax evasion.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak to new clause 5, which, as the Minister said, stands in my name and those of colleagues in the all-party parliamentary anti-corruption group. The reason for tabling new clause 5 was to probe the Government on the issue and make sure that we make full use of the unexplained wealth orders and the interim freezing orders that we envisage in passing this Bill. I fear that if we are not careful, the various authorities that can use the orders may be a little concerned about the possibility that the people against whom they want to use them—who, in some cases, will no doubt be very rich and powerful and will not take the freezing or restriction of their wealth lightly—will seek to frustrate the process and oppose the orders with every means available to them. They might, for instance, incur huge costs—perhaps well above what could be considered reasonable in the circumstances—and try to force them on to the taxpayer at a later date if they succeeded in resisting the orders.
Although it is absolutely right for people to be able to recover reasonable costs if the state tries to impose orders and fails, it would be unreasonable for them to engage numerous very highly paid barristers and incur costs that were wholly disproportionate, which the taxpayer would end up having to pay. The real risk is that bodies trying to use these powers would be deterred from doing so, because they would fear that very rich people might take large chunks of their budgets for a long period while resisting the orders.
The aim of new clause 5 is to establish whether the existing powers for the courts to restrict the amount of costs recovered can be described as applying to efforts to obtain the orders that are specified in the Bill, so that it is plain to everyone that the various state authorities, acting competently and reasonably clearly in trying to use the orders, cannot be unreasonably opposed and end up with excessive costs. It would be helpful if the Minister explained how he thinks the orders would work and what he thinks about the interaction with the existing capping rules for the courts.
This is not an entirely theoretical issue. In the past, very significant costs have been awarded against the Serious Fraud Office. I am not pretending that the circumstances were similar to those that we are discussing in this instance—I think that that may not have been the finest hour of the Serious Fraud Office—but there is clearly evidence that the sort of people with whom we are dealing might try to obtain costs that would have a deterrent effect on the use of the orders. It would be useful to hear from the Minister whether he thinks that the courts can and should use various cost-capping measures to ensure that we are not unreasonably exposed to very high costs.
Richard Arkless
I want to talk briefly about what I must admit is probably my favourite section of the Bill—the part that deals with unexplained wealth orders. I think it is an excellent provision, which is likely to drive a Trojan horse right through the assets of criminals who choose to lodge them in the United Kingdom.
The hon. Member for Amber Valley (Nigel Mills) made some very valid points about new clause 5. Indemnity costs can be easily translated to mean, in layman’s terms, full costs. In other words, every single hour and every penny of the expense on the file can be charged to the losing party, with no assessment of whether those costs are reasonable. Given that we are talking about politically exposed people, potentially in other jurisdictions, we can imagine the number of officials travelling back and forth on flights. All that will find its way on to a costs sheet, and all of it will be recoverable to the payee in indemnity costs. We could end up with an inequality of arms, not in favour of the Government but in favour of the respondents, which I think would be very dangerous.
The threat of indemnity costs acts as a major litigation risk for the claimants or pursuers, or, in this case, the applicants. If they know that they are likely to be in for a bigger bill, they will think twice about making applications. These are our law enforcement agencies, and I believe that they should be able to pursue their applications with determination, without fear or favour, and without the risk of incurring indemnity costs which would be deeply disproportionate. That would be very bizarre and counterproductive.
I thank the hon. Member for Amber Valley for tabling his probing new clause, and I shall be pleased to hear what the Government have to say about it. As a boring, pedantic lawyer, I think it worth mentioning that indemnity costs are very rare, and arguably arise only in proportionate circumstances. However, we are talking about politically exposed people with potentially limitless funds. The better they can make their case in court, the more likely it is that they will be awarded indemnity costs if they are successful, and I think that we should take that risk out of the equation.
As I have said, the unexplained wealth orders provision is an excellent feature of the Bill. Let me explain exactly how the orders would work. The Bill will enable a court in Scotland—the Court of Session—on application by Scottish Ministers to make an unexplained wealth order. Such orders will require individuals or organisations to explain the origin of their assets if there are reasonable grounds for suspecting that they may have been involved in criminality, or intend to use that wealth for criminal purposes, and if the value of the assets exceeds £100,000. During earlier stages of the Bill, the Minister and I discussed that threshold, and I should be pleased if he could update me on his thoughts about it.
Mr Wallace
In response to what has been said about the issue, and the sensible suggestions made by the hon. Gentleman, we are considering options for potentially lower thresholds, to be dealt with in the other place. We will of course inform him when there is agreement across the Government.
Richard Arkless
That is very co-operative of the Minister, and I greatly appreciate it. I may not have his confidence in the other place, but we will wait with bated breath.
Unexplained wealth orders will be available to the courts when assets appear disproportionate to known legitimate income. For example, it was reported recently that a taxi driver owned a £1 million fish tank. That is not to say that taxi driving is not a potentially lucrative trade, but the asset could certainly be disproportionate to that person’s income. Failure to provide a response to an order and explain the legitimate source of funds would give rise to a presumption that the property was recoverable, which would make any subsequent civil recovery action much easier.
I must say, as a lawyer, that the notion of reversing the burden of proof does not automatically sit very comfortably with me, but, as in other areas, I consider it to be proportionate to the issue at stake. Sound legal principles such as the presumption of innocence, and the burden of proof being on the Crown, should not inadvertently protect criminals, which I suspect may have been the case thus far. The key aspect of this provision is that a criminal conviction will no longer be necessary before law enforcement can pierce the criminal’s veil that camouflages his wealth. Getting away with the crime itself will no longer protect a criminal’s wealth. The Bill will allow this power to be applied to foreign politicians and officials or those associated with them, known as politically exposed people. That will enable the issue to be tackled substantively and determinedly for the first time.
I agree with some of what was said by the hon. Member for Swansea East (Carolyn Harris) about resources. Part of the reason for introducing provisions for unexplained wealth orders is the fact that many law enforcement agencies think that there is a raft of applications, ready to be made immediately. There are properties and asset groups and accumulations in this country, and in some cases we do not know where they come from. If the Act receives Royal Assent, this power will land on the desks of law enforcement agencies that potentially have applications piled up. I think that, in those circumstances, resources are a very viable concern.
I hope that the Minister will be able to give us some reassurance, which unfortunately he has not been able to give thus far during the Bill’s passage, that enough resources will be allocated to make unexplained wealth orders work. This is probably the best part of the Bill, and it needs to work. If it does work, we shall make huge strides in ensuring that this country cannot be used as a safe haven for dirty money.
Mr Wallace
This has been a short and helpful part of our proceedings today. I am pleased that Members in all parts of the House agree in principle with the concept of the unexplained wealth order. I think that it will be an incredibly useful tool. The first group of amendments dealt with another tool that could be used to ask people to explain where their wealth came from, even without the evidence or the intelligence that would link them to the offence of gross human rights abuse that we are seeking to introduce.
The use of unexplained wealth orders to put the onus on individuals to tell us where they acquired their wealth will obviously be a strong step towards clearing the United Kingdom of people who seek to harbour their ill-gotten gains here, but we should not forget that it will also deal with criminals in the UK who are “washing” their wealth and depositing it elsewhere in the community. Such people sometimes hide in plain sight.
What I am about to say is no different from what I have said to the National Crime Agency. I would like to see this provision used sooner rather than later. We in Parliament always get lobbied for new offences—lots of people come along and lobby us, and there is always either a Home Office Bill or a Ministry of Justice Bill going through this House—and a lesson I have learned in my 12 years in Parliament is that if offences are not used sooner rather than later, many of them just sit on shelves. It is therefore important that the law enforcement agencies hear Parliament today say, “We are—hopefully—going to give you these powers; we want them to be used.”
Richard Arkless
Given that we want to start using these orders immediately, resource is a key issue. It is difficult to put a price on this, but has any assessment been made within Government of what this is going to cost in the next two to three months after Royal Assent, because there are a lot of applications ready to be made and we need the resources to make them?
Mr Wallace
I can reassure the hon. Gentleman and the hon. Member for Swansea East (Carolyn Harris) that one part of government that has not seen a significant reduction in its budgets is the area of the regional organised crime units, the national crime agencies and the security and intelligence agencies, which assist us in tackling organised crime and money laundering. The National Crime Agency has a capital budget of £50 million this year, with £427 million of funding. It is supported in England and Wales by the regional organised crime units, which have got £519 million of funding. The figures for the Serious Fraud Office are £45 million, with £5 million of capital this year, and the figures for HMRC are £3.8 billion in resource and £242 million in capital. Of course, in terms of crime-fighting, the question is, “How long is a piece of string?”
Dr Huq
I am listening intently to what the Minister is saying, and I am reminded of an Evening Standard report—from earlier this year, I think—headed: “Home Office reveals new Criminal Finances Bill will target just 20 tycoons a year.” The report says that is based on the Home Office’s own impact assessment which
“predicts that the power will remain unused in its first year ‘as part of the learning curve’, and thereafter will be used in only 20 cases each year.”
That is because of resource implications, which is precisely the point raised by the hon. Member for Dumfries and Galloway (Richard Arkless). Does the Minister have any comment to make on that?
Mr Wallace
The impact assessment is not linked to access to funds. The impact assessment is a judgment as to how it would see these powers being used. Probably like the hon. Lady, I would like to see them used an awful lot more, but that is an impact assessment, and the NCA does not follow the impact assessment. If the evidence is presented or the cases are put before it that allow it to do 100, it will do 100. It is not restricted by the impact assessment. I would therefore not be too distracted by the London Evening Standard and the impact assessment.
Instead, I would focus on the fact that we have well resourced our law enforcement agencies to tackle this, and this Bill will give them the power. They have the political support of both sides of the House to exercise that power, so let us see how far we go. However, I would be delighted to join the hon. Lady in asking, in 12 months’ time or whenever the Bill goes through, why we have not used them more; I will be asking the NCA and all the other organisations to try to make sure they have done so.
The hon. Member for Swansea East made a point about the asset recovery incentivisation scheme, or ARIS, funding for the recovery of assets not really being worth the paper it was printed on—I think that was what she was trying to say, if she will forgive me for putting words in her mouth. However, since 2006, under an arrangement under her last Government, £764 million has gone into funding those law enforcement agencies, and in the last three years £257 million has gone in. Hopefully, with the new arrangement, above the baseline of, I think, £146 million—I will correct that in writing if it is not £146 million—100% will be kept.
We are also following on from the excellent reports from the Home Affairs Committee and the Public Accounts Committee looking into why we have not achieved enough in terms of confiscation orders and recovery of assets. I have told officials I am particularly concerned that it was suggested in one of those reports that the focus seemed to be on small assets—the collection rate was higher for smaller amounts of money, but lower among millionaires—and I have specifically directed officials that we must look at turning the tables. I want all assets collected that are subject to confiscation, but those reports are a good guideline and we did not ignore that specific point. We will certainly make sure that we build on it and improve on it, because there is money in it for us all, should we do it, and I am very keen that we should.
New clause 5, tabled by my hon. Friend the Member for Amber Valley (Nigel Mills), seeks to prevent the courts from awarding uncapped costs against enforcement agencies when they have brought unsuccessful applications for unexplained wealth orders or related interim freezing orders. I appreciate that this is to ensure that law enforcement agencies do not feel constrained in their ability to apply for an unexplained wealth order, for fear of incurring financial liability. But, as law enforcement representatives told the Public Bill Committee in November, this is a natural part of the state wielding its investigative powers, and they are certainly not pressing for a provision of this type. It is a well-established principle that the losing party pays the winning party’s legal costs. This is an important check and balance on parties bringing spurious claims, or the state using its powers erroneously.
At the same time, the civil procedure rules do already allow for capping in exceptional circumstances, so law enforcement agencies would be able, as things stand, to apply for a cost-capping order in appropriate cases. I undertake to ensure that this point is included in the code of practice that will support the use of these orders. I trust that Members will agree that this is a far more sensible way forward than a blanket rule for all unexplained wealth order cases.
It is crucial that the initial cases are thoroughly developed to ensure that the orders have the greatest possible impact. We are already actively engaging with law enforcement officers and prosecutors to encourage the use of the new powers being introduced by the Bill. Ultimately, it will be for the enforcement authorities to decide when to use them, but we will—as, no doubt, will Her Majesty’s loyal Opposition—monitor and review the use of the orders once they have been introduced. This will inform future support or changes that may be needed to ensure that they are being used to maximum effect.
The hon. Member for Swansea East explained from the Opposition Front Bench the objective behind her amendment 1. However, as I explained when this issue arose in Committee, politically exposed persons in the UK and European economic area can, in fact, already be made subject to an unexplained wealth order. These orders can be made in two situations: first, where an individual is suspected of involvement in serious crime; and secondly, in relation to non-EEA politically exposed persons. An unexplained wealth order can thus be made in relation to politicians and senior officials in Europe, when they are suspected of being involved in serious criminality. In such an investigation, if evidence exists of links to serious organised crime, it should be available, obtainable and readily provided, and it would be unreasonable and disproportionate, for example, for Members of this House to be made subject to an order without any evidence of criminality.
However, for investigations into grand corruption involving countries outside Europe, including the developing world, that evidence is far less likely to be available. It will be much harder in some countries where corruption is endemic to get the evidence to bring to the court at first about wealth hidden in London. That is why we have chosen to have a lower threshold for evidence when applied to countries outside the EEA.
We should not forget that unexplained wealth orders are not an end in themselves; they are part of a process leading eventually, should those concerned not be able to give satisfactory answers, to another action in court to confiscate the assets. As I said when I met the right hon. Member for Hackney North and Stoke Newington (Ms Abbott) to discuss this, I do not want unexplained wealth orders also to produce a lot of derelict empty buildings that are caught up in legal dispute and sitting around London being no good for anyone. I want them to be used and be placed on people whom we have linked to serious crime, and then, should they not be able to satisfy the court, for us then to go to the next step and recover that asset, so that the houses and the housing market are freed up, and any money is returned to whoever it has been stolen from—a country, or other people. An order is therefore a step in the process, not an end in itself.
I hope that I have sufficiently reassured the House on these points, and that the Opposition will feel inclined to not press their amendment.
Question put and agreed to.
New clause 8 accordingly read a Second time, and added to the Bill.
New Clause 2
Failure to Prevent an Economic Criminal Offence
“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).
(2) For the criminal purposes of this clause—
“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.
“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.
(3) It is a defence for B to prove that, when the economic criminal offence was committed—
(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or
(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.
(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.
(5) A relevant body guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine,
(b) on summary conviction in England and Wales, to a fine,
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(6) It is immaterial for the purposes of this section whether—
(a) any relevant conduct of a relevant body, or
(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.
(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”—(Sir Edward Garnier.)
This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.
Brought up, and read the First time.
Sir Edward Garnier (Harborough) (Con)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Natascha Engel)
With this it will be convenient to discuss the following:
New clause 3—Failure to Prevent an Economic Criminal Offence (No. 2)—
“(1) A relevant body (B) is guilty of an offence if a person commits a economic criminal offence when acting in the capacity of a person associated with (B).
(2) For the purposes of this clause—
“economic criminal offence” means one of the following—
(a) a common law offence of conspiracy to defraud;
(b) an offence under section 1, 5 or 7 of Fraud Act 2006;
(c) an offence under section 1, 17 or 20 of the Theft Act 1968 (theft, false accounting and destruction of documents);
(d) an offence under section 993 of the Companies Act 2006 (fraudulent trading);
(e) an offence under sections 346, 397 and 398 of the Financial Services and Markets Act 2000 (providing false statements to auditors, misleading statements, and misleading the FCA);
(f) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002 (concealing criminal property, facilitating acquisition, acquisition and use of criminal property).
“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.
(3) It is a defence for B to prove that, when the economic criminal offence was committed—
(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or
(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.
(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.
(5) A relevant body guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine,
(b) on summary conviction in England and Wales, to a fine,
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(6) It is immaterial for the purposes of this section whether—
(a) any relevant conduct of a relevant body, or
(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.
(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”
This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to certain offences listed in subsection (2).
New clause 4—Failure to prevent criminal financial offences in the UK—
“(1) A relevant body (B) is guilty of an offence if a person commits a criminal financial offence when acting in the capacity of a person associated with B.
(2) It is a defence for B to prove that, when the criminal financial offence was committed—
(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or
(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.
(3) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing criminal financial offences.
(4) For the purposes of this clause—
“criminal financial offence” means an offence listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013 [that could not be prosecuted under the offences created by sections 7 and 38 of this Act],
or, one of the offences listed below—
(a) an offence under section 1, 6 or 7 of the Fraud Act 2006;
(b) an offence under section 1, 17 or 20 of the Theft Act 1968;
(c) an offence under section 993 of the Companies Act 2006;
(d) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002;
(e) the common law offence of conspiracy to defraud;
“relevant body” has the same meaning as in section 36.
(5) A relevant body guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine,
(b) on summary conviction in England, to a fine,
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(6) It is immaterial for the purposes of this section whether—
(a) any relevant conduct of a relevant body, or
(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.”
This New Clause would create an offence of failing to prevent any financial offence listed in Part 2 of Schedule 17 of the Crime and Courts Act 2013.
New clause 6—Public registers of beneficial ownership of companies registered in the Overseas Territories—
“(1) In Part 1 of the Proceeds of Crime Act 2002 (introductory), after section 2A, insert—
“2AA Duty of Secretary of State: Public registers of beneficial ownership of companies registered in Overseas Territories
(1) It shall be the duty of the Secretary of State, in furtherance of the purposes of—
(a) this Act; and
(b) Part 3 of the Criminal Finances Act 2017
to take the steps set out in this section.
(2) The first step is, no later than 31 December 2018, to provide all reasonable assistance to the Governments of the UK’s Overseas Territories to enable each of those Governments to establish a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction.
(3) The second step is, no later than 31 December 2019, to prepare an Order in Council and take all reasonable steps to ensure its implementation, in respect of any Overseas Territory that has not yet introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction. This Order would require the Overseas Territory to adopt such a register.
(4) In this section “a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.””
This new clause would require the Secretary of State to take steps to provide that Overseas Territories establish publicly accessible registers of the beneficial ownership of companies, for the purposes of the Proceeds of Crime Act 2002 and Part 3 of the Bill (corporate offences of failure to prevent facilitation of tax evasion).
New clause 10—Duty to prevent use of new Limited Partnerships for financial criminal activity—
“(1) The Treasury may not lay regulations before Parliament on new Limited Partnerships before the Secretary of State has completed and published a review of the proposed regulations.
(2) It shall be the duty of the Secretary of State to review draft regulations which would allow the creations of new Limited Partnerships, in order to prevent the use of new Limited Partnerships for financial criminal activity.
(3) In performing that duty the Secretary of State must, in particular, have regard to the contribution transparency may make in tackling tax evasion, money laundering, national and cross border criminality, and terrorist financing.
(4) Following any review under subsection (2) the Secretary of State must lay a report before Parliament on what steps the Government will take to prevent new Limited Partnerships being used for criminal purposes.
(5) In conducting the review the Secretary of State must consult—
(a) the Scottish Government,
(b) the National Crime Agency,
(c) the Serious Fraud Office,
(d) the Financial Conduct Authority,
(e) HMRC,
(f) interested third sector organisations, and
(g) any other persons the Secretary of State deems relevant.”
This new clause sets a duty on the Secretary of State to review Treasury proposals for new Limited Partnerships to prevent their use for financial criminal activity, including tax evasion, money laundering and terrorist financing. In carrying out the review the Secretary of State will be required to consult those groups listed in subsection (5) and lay a report before Parliament.
New clause 11—Failure to prevent facilitation of tax evasion offences: consultation on other jurisdictions—
“(1) Within 12 months of this Act receiving Royal Assent, the Secretary of State must conduct a public consultation on the issues listed in subsection (2).
(2) The issues are—
(a) the desirability of the Crown Dependencies and Overseas Territories introducing equivalent offences to those introduced by sections 40 and 41 of this Act; and
(b) the steps that would need to be taken for the Crown Dependencies and Overseas Territories to introduce equivalent offences to those introduced by sections 40 and 41 of this Act.
(3) As part of this consultation the Secretary of State must seek views from—
(a) the governments of the Crown Dependencies and Overseas Territories,
(b) such bodies as the Secretary of State or the governments specified in subsection (3)(a) consider appropriate,
(c) any other person or body who the Secretary of State deems relevant, with particular regard to non-governmental bodies and private sector entities.
(4) The Secretary of State must lay before both Houses of Parliament a report setting out the outcome of this consultation within 24 months of this Act receiving Royal Assent.”
New clause 12—Failure to prevent facilitation of tax evasion offences: publication of convictions—
“(1) The Secretary of State must publish an annual report listing all bodies and organisations that have been found guilty of a failure to prevent facilitation of a UK foreign tax evasion offence within the previous five years.”
New clause 13—Failure to prevent tax evasion offences: sentencing guideline—
“(1) The Secretary of State must produce sentencing guidelines for the level of fine to be imposed on bodies found guilty of failure to prevent facilitation of a UK foreign tax evasion offence.
(2) Such guidance must stipulate that the maximum level of the fine cannot be greater than the total value of the tax whose evasion was facilitated.”
New clause 14—Failure to Prevent an Economic Criminal Offence (No. 3)—
“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).
(2) For the criminal purposes of this clause—
“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.
“relevant body” and “acting in the capacity of a person associated with B” have the same meaning as in section 39.
(3) B is guilty of an offence under this section if a person associated with B commits an economic criminal offence intending—
(a) to obtain or retain business for B; or
(b) to obtain or retain an advantage in the conduct of business for B or otherwise for the financial benefit of B.
(4) It is a defence for B to prove that, when the economic criminal offence was committed—
(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or
(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.
(5) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.
(6) A relevant body guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine,
(b) on summary conviction in England and Wales, to a fine,
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(7) It is immaterial for the purposes of this section whether—
(a) any relevant conduct of a relevant body, or
(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.
(8) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”
This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.
New clause 15—Failure to Prevent an Economic Criminal Offence (No. 4)—
“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).
(2) For the criminal purposes of this clause—
“economic criminal offence” means one of the following—
(a) a common law offence of conspiracy to defraud;
(b) an offence under section 1, 5 or 7 of Fraud Act 2006;
(c) an offence under section 1, 17 or 20 of the Theft Act 1968 (theft, false accounting and destruction of documents);
(d) an offence under section 993 of the Companies Act 2006 (fraudulent trading);
(e) an offence under sections 346, 397 and 398 of the Financial Services and Markets Act 2000 (providing false statements to auditors, misleading statements, and misleading the FCA);
(f) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002 (concealing criminal property, facilitating acquisition, acquisition and use of criminal property).
“relevant body” and “acting in the capacity of a person associated with B” have the same meaning as in section 39.
(3) B is guilty of an offence under this section if a person associated with B commits an economic criminal offence intending—
(a) to obtain or retain business for B; or
(b) to obtain or retain an advantage in the conduct of business for B or otherwise for the financial benefit of B.
(4) It is a defence for B to prove that, when the economic criminal offence was committed—
(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or
(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.
(5) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.
(6) A relevant body guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine,
(b) on summary conviction in England and Wales, to a fine,
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(7) It is immaterial for the purposes of this section whether—
(a) any relevant conduct of a relevant body, or
(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.
(8) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”
This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.
New clause 16—Conversion of platforms to centralised registers: review—
“(1) Within one year of this Act receiving Royal Assent the Secretary of State must establish a review of the operational efficacy of closed beneficial ownership platforms created by Crown Dependencies or British Overseas Territories that are subject to the automatic exchange of beneficial ownership information with Her Majesty’s Government for the purpose of combating illicit financial activity.
(2) The aim of the review will be to gather information to equip Her Majesty’s Government to take all steps necessary to provide financial, administrative or any other support to assist Crown Dependencies and British Overseas Territories in converting all such beneficial ownership platforms into closed centralised registers of beneficial ownership.
(3) In the course of the review the Secretary of State must consult—
(a) the governments of any Crown Dependencies and Overseas Territories which have created closed beneficial ownership platforms and which are subject to the automatic exchange of information with Her Majesty’s Government for the purpose of combating illicit financial activity; and
(b) such bodies as the Secretary of State or governments under subsection (3)(a) deem appropriate.
(4) The review shall be completed and laid before Parliament within one year of its establishment.
(5) No later than one year after the review has been laid before Parliament, Her Majesty’s Government must have taken all steps necessary to assist relevant Crown Dependencies and British Overseas Territories in the establishment of closed centralised registers of beneficial ownership.
(6) Her Majesty’s Government shall supply quarterly reports to Parliament of the progress of steps taken under subsection (5), and such reports shall set out—
(a) concerns expressed by relevant Crown Dependencies and British Overseas Territories about conversion of beneficial ownership platforms to centralised registers, and
(b) an assessment by Her Majesty’s Government of the extent to which objections to the creation of centralised registers can be justified on a constitutional, economic, administrative or any other operational basis.”
New clause 17—Public registers of beneficial ownership of companies registered in Crown dependencies—
“(1) In Part 1 of the Proceeds of Crime Act 2002 (introductory), after section 2A, insert—
“2AA Duty of Secretary of State: Public registers of beneficial ownership of companies registered in Crown dependencies
(1) It shall be the duty of the Secretary of State, in furtherance of the purposes of—
(a) this Act; and
(b) Part 3 of the Criminal Finances Act 2017
to take the actions set out in this section.
(2) The first action is, no later than 31 December 2017, to provide all reasonable assistance to the Governments of Crown Dependencies to enable each of those Governments to establish a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction.
(3) The second action is, no later than 31 December 2019, to publish legislative proposals to require the Government of any Crown dependency that has not already established a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction to do so.
(4) In this section—
“a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.
“legislative proposals” means either—
(a) a draft Order in Council; or
(b) a Bill presented to either House of Parliament.”
New clause 18—Whistleblowing in relation to failure to prevent facilitation of tax evasion and money laundering—
“(1) The Secretary of State shall conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector in relation to the disclosure of suspected corporate failure to prevent facilitation of tax evasion and money laundering.
(2) The review must consider, but shall not be limited to—
(a) arrangements to protect the anonymity of persons disclosing suspected corporate failure to prevent facilitation of tax evasion and money laundering;
(b) the efficacy of current penalties for institutions that treat whistleblowers unfairly, and proposals for future criminal penalties.
(3) In conducting the review the Secretary of State must consult—
(a) whistleblowers in the banking and financial services sector,
(b) devolved administrations,
(c) interested charities,
(d) the relevant regulators, and
(e) any other persons the Secretary of State deems relevant.
(4) The Secretary of State must lay the report to Parliament within six months of the passing of this Act.”
This new clause requires the Secretary of State to conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector, in consultation with those groups listed in subsection (3), and then lay a report before Parliament on steps the Government will take to bring forward penalties for institutions that fail to protect whistleblowers.
New clause 19—The culture of the banking industry and failure to prevent the facilitation of tax evasion—
“(1) The Secretary of State must undertake a review into the extent to which banking culture contributed to the failure to prevent the facilitation of tax evasion in the banking sector.
(2) The review must consider, but shall not be limited to, the following issues—
(a) the impact of culture change on decision making senior executive and board level;
(b) the pressure on staff to meet performance targets;
(c) how allegations of tax evasion are reported and acted on.
(3) The review must set out what steps the UK Government intends to take to ensure that banking culture is not facilitating tax evasion.
(4) In carrying out this review, the Secretary of State must consult—
(a) devolved administrations;
(b) HMRC;
(c) the Serious Fraud Office;
(d) the Financial Conduct Authority;
(e) interested charities, and
(f) anyone else the Secretary of State deems appropriate.
(5) The Secretary of State shall lay a copy of the review before the House of Commons within six months of this Act receiving Royal Assent.”
New clause 20—Report on the impact of the criminal offences relating to offshore income, assets and activities—
“(1) The Chancellor of the Exchequer shall, within one year of the coming into force of the provisions in Tax Management Act 1970 relating to criminal offences relating to offshore income, assets and activities introduced by section 165 of the Finance Act 2016 publish a report on the impact of the introduction of these offences.
(2) The report must include, but need not be limited to, information about—
(a) the number of persons who have been charged with offences under each of sections 106B, 106C and 106D of the Tax Management Act 1970;
(b) the number of persons who have been convicted of any such offence;
(c) the average fine imposed; and
(d) the number of people upon whom a custodial sentence has been imposed for any such offence.”
New clause 21—Report on income lost to tax evasion—
“(1) The Chancellor of the Exchequer shall, within one year of the passing of this Act, prepare and publish a report, in consultation with stakeholders, on the value of income lost to the Exchequer from tax evasion offences.
(2) The report must include the following—
(a) the value of the income lost to the Exchequer from tax evasion offences in the financial years—
(i) 2015-16;
(ii) 2014-15;
(iii) 2013-14;
(iv) 2012-13; and
(v) 2011-12;
(b) a detailed summary of the model used by HMRC for estimating income lost to the Exchequer from tax evasion offences.
(c) an assessment of the efficacy of HMRC’s performance in relation to dealing with tax evasion, including—
(i) a breakdown of specific HMRC departments or units dealing with investigation and enforcement of tax evasion matters;
(ii) details of the numbers of staff in each of the years listed in paragraph (a) who are located within departments or units dealing with investigation and enforcement matters in relation to tax evasion;
(iii) details of the budgets allocated to departments or units dealing with investigation above; and
(iv) details of the numbers of prosecutions or the amount of tax recovered in each financial year listed in paragraph (a) as a result of the work of HMRC departments or units dealing with investigation and enforcement matters in relation to tax evasion in those financial years.”
Sir Edward Garnier
I shall be relatively brief in introducing this group of new clauses. In moving new clause 2, which stands in my name and those of a number of hon. Members on both sides of the House and which mirrors new clauses 3, 4, 14 and 15, I want to introduce a debate about the future of corporate criminal liability in this jurisdiction. I must declare an interest, as over the past few years I have been instructed by the Serious Fraud Office in a number of cases involving the prosecution of large international companies. One of the problems that prosecutors and, no doubt, investigators have found in this jurisdiction when dealing with the modern corporate landscape—to use that hideous jargon—involves trying to fix liability on a company suspected of criminal activity, as a matter of criminal law. It is not difficult to fix criminal liability on an individual if the evidence is there: the person either did or did not do it, and they either did or did not have the necessary criminal intent.
Under current English law, however, fixing criminal liability on a corporation involves resorting to what is called the identification principle. This involves finding someone of sufficient seniority within a corporation who can act as or be described as the directing mind of the company. Through that identified person, we can then move on to fix criminal liability on the corporation. That was fine in the Victorian era, when most companies had one or two directors. An example would be a small business in a market town in the 1860s or 1870s, which would have been owned and directed by two or three men—it was always men in those days. If a fraud was committed on behalf of the company, it would have been perfectly easy to find the directing mind of that company among the small group of directors.
As the industrial revolution and corporate legal development proceeded during the late 19th century and early 20th century, however, it became clear that companies were getting bigger. An increase in international trade meant that companies based in this country had offices, and directing minds, in other parts of the world. In 1912, the United States dealt with this by doing away with the identification principle involving the directing mind and, through case law, by developing a principle in criminal law that a company could be vicariously liable for the criminal acts of its employees on the basis that they were conducting criminal activities for the benefit and on behalf of the company.
We in this country reached the stage long ago at which we needed to reform the way in which we look at corporate criminal liability. The hon. Member for Dumfries and Galloway (Richard Arkless), with his Scottish legal experience, will no doubt inform us whether the situation is the same in Scotland as it is in England, but I believe that it is uncontroversial to say that the Victorian identification principle is no longer apt to deal with international corporations. I am not picking on the company that I am about to mention because I think it has committed a criminal offence; quite the contrary—I just want to use it as an example of a large international company. British Telecommunications is a huge company that employs hundreds of thousands of people all around the globe doing various things in the telecoms world, all of them entirely legitimate and beneficial to the company, its shareholders and our national economy. Surely, however, it is a matter of common sense to say that it would be extremely difficult nowadays to fix upon an individual or small group of individuals as representing the directing mind of that company if it was suspected that an offence had been committed many miles away from the main board and the headquarters of the company in London. I repeat that I have used British Telecommunications simply as an example of a large international company with operations right around the world.
Of course it would be perfectly possible to fix upon an individual, a human being, who had committed an offence. It might well be that that individual had committed an offence for the benefit of the international corporation, but unless that person was of sufficient seniority within the hierarchy of that great big international company, it would be very difficult to fix criminal liability for that person’s offence on the corporation as well. As I have said, the United States has been getting round that problem for more than 100 years by using the principle of vicarious liability, which we are used to dealing with in this country in civil law but not in criminal law.
I believe that there are two ways in which we can approach this question, and this is the whole point of the new clauses that I and others have tabled. First, we could use the American system of vicarious liability, and there are plenty of good arguments for doing so. Secondly, we could approach the problem—as we have done in the new clauses—by using the failure to prevent regime, in which, when a company fails to prevent someone or another body associated with it from committing a specified offence, it thereby becomes liable for the criminal offence itself. We already have that provision on the statute book in section 7 of the Bribery Act 2010, and it is about to be added to the statute book through the existing provisions in this Bill relating to tax offences. That follows David Cameron’s speech to the corruption summit at Lancaster House last summer.
In pushing forward these new clauses, I want to invite Parliament, in this House and the other place, and the Government—by which I mean not only the political Government but the non-political Government: the officials who run the Government day by day and advise on matters of policy—to consider whether extending the failure to prevent regime would be an easier and better way to deal with this than turning the whole thing on its head by adopting the vicarious liability principle wholesale.
There are plenty of arguments for and against the extension of the section 7 failure to prevent bribery model. I have attended a number of meetings with criminal lawyers who are far more experienced than I am. Indeed, I see one sitting just two Benches in front of me, behind the Minister. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) will know, as I have come to learn over the past few years since I have taken an interest in corporate crime, that a number of difficulties are created by the failure to prevent model. I will not rehearse them all now, but some of those difficulties were set out on Friday 13 January 2017 in the Ministry of Justice’s “Call for evidence” paper, which sets out five options for a failure to prevent regime.
I favour the failure to prevent model over the vicarious liability model because it is already set within our system. The new clauses would not extend the principle but merely extend the ambit of the criminal offences that could come within a failure to prevent system. The provisions will not be brought into this Bill because it is highly unlikely that the Government would accept any of them—albeit they may nod politely at them—when the Ministry of Justice’s call for evidence process is still open. However, I hope that the Government will look carefully at the shape and design of the new clauses with a view to considering vigorously whether what we have proposed as a matter of principle is worthy of greater thought.
The intention of new clause 2 is to create a corporate offence of failing to prevent economic crime, as defined by reference to the offences listed in part 2 of schedule 17 to the Crime and Courts Act 2013. Again, I will do my best to be brief. That schedule brought in the deferred prosecution agreement system for dealing with errant companies. I declare an interest, with both capital and small letters, in that not only have I been instructed by the SFO in two of the three deferred prosecution agreements that have so far taken place, but I brought the system into law when I was Solicitor General—at least I began it before I got the sack. There is a cloud in every silver lining, is there not?
Sir Edward Garnier
Very few. I am diverting myself, because I deliberately said “a cloud in every silver lining” not “a silver lining in every cloud.”
The short point is that schedule 17 to the 2013 Act contains about 50 economic and financial criminal offences that can be dealt with through deferred prosecution agreements between either the Crown Prosecution Service or the SFO on the one hand and corporations—that is to say respondents and defendants that are not human beings—on the other. Those offences are perfectly capable of being moved across into the failure to prevent regime. As I said, section 7 of the Bribery Act 2010 makes it an offence to fail to prevent bribery, and we are about to have an offence of failing to prevent a tax offence, so why not—I ask rhetorically on this occasion—extend the failure to prevent regime across to these other offences? New clause 3 does exactly the same, save that it limits the offences to those set out in its subsection (2).
New clauses 4, 14 and 15 contain provisions suggested by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) that broadly address the same issue that I am discussing. I will not press new clause 2 to a Division, because these are probing amendments designed to create a public discussion, and I hope that they will inform the Ministry of Justice’s discussion paper. I also hope that they will encourage the Home Office and the Minister, with whom I have had some useful discussions about this and other matters to do with the Bill, to consider carefully and positively the extension of the failure to prevent regime.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
I start by thanking the Security Minister and the Government for responding to the campaign on Scottish limited partnerships in which I have been involved for about a year. We are all grateful that the Government recently announced that they will conduct a review, which means that the amendment that I have regularly been tabling to Bills over the past year is no longer necessary. However, I have found myself having to table a different new clause; I will explain why and why it troubles me greatly that I am forced to do so.
For Members who are unfamiliar with why my colleagues and I have been so concerned about these things called Scottish limited partnerships, let me point out that they do remarkable reputational damage to Scotland and probably to the UK’s financial sector. They are a front for some of the worst international crime, money laundering and hiding of criminal assets to be found. Without going into great detail of how they manage to do that, it might interest the House to know just a few of the types of crime for which they have been used.
SLPs have been at the centre of Ukrainian arms deals, kick-backs and a major Moldovan banking fraud. They have been at the heart of a major corruption scandal in Latvia involving the nephew of Uzbekistan’s President Islam Karimov. They have been used to run international mail frauds, including that of a French psychic who has been targeting vulnerable elderly people with offers of spiritual insights for significant amounts of cash. They are involved in a $1 billion copyright infringement case that is taking place in the United States. They have been involved in criminal activity such as setting up paedophile websites and raising money through such horrible activities. The list goes on and on. SLPs, and other limited partnerships to some extent, have been utilised as a way of hiding billions of pounds of criminal money. Often that money does not necessarily come here, as we find it in tax havens. The legitimation of a UK or Scottish limited partnership is used as a means of hiding the beneficiaries of such criminal activity.
For those reasons, I am particularly grateful that the Minister has been willing to speak seriously about this. He has done more than any other Minister to move the Government to respond to some of our concerns, so why did I table new clause 10? I did so because SLPs and limited partnerships are based on a 1907 Act, of which probably few people are aware, that amended the Partnership Act 1890, of which even fewer people are aware. By some chance, I sit on the Regulatory Reform Committee, which is so popular that in December it held its second meeting since I joined it in January 2016. Why did we have our second meeting in December? Because we were told that the Treasury was introducing a legislative reform order. And what was that legislative reform order for? At the same time as the Government announced a much-welcomed review of limited partnerships, the Treasury sought to create a new form of limited partnership—private fund limited partnerships —not on the Floor of the House, but through a device that is supposed to be used only for non-controversial matters of legislative reform. I can hardly think of anything more controversial than a mechanism that has been used for international criminal assets and money laundering, but I have even greater concerns.
I will have to leave the debate in about an hour to attend a meeting of the Regulatory Reform Committee to take evidence on the Treasury’s proposals—[Interruption.] I hear Members suggesting they are jealous, but I am sure that they are not. Under the proposals, there are four areas with which even SLPs have to comply that these new private fund limited partnerships will not. For example, the jurisdiction in which the general partners are registered no longer needs to be divulged. The registration numbers of the general partners no longer need to be divulged. The jurisdiction in which the limited partners are registered no longer needs to be divulged, and the registration numbers of the limited partners, if they are corporations, no longer need to be divulged.
Not only are we creating a new form of limited partnership, but we are doing so with considerably less regulation than is in place for existing limited partnerships that have been a front for international criminality. As I have such great faith in the Minister for Security, our new clause would require the Home Office to conduct a review before the Treasury introduces any legislation to create a new form of limited partnership so that we can ensure that those limited partnerships will not be subject to the type of criminal abuse and illegality that we have found with Scottish limited partnerships.
There is also a broader question to be answered. Why are this Government using a device such as a legislative reform order to try to quickly establish something in such a controversial area? Surely this is something that should be fully and properly debated on the Floor of the House. That is why, when I go to the Committee shortly, I will certainly not be agreeing that the proposal makes progress. I will do my best to require that this matter is brought back to the Floor of the House so that it can receive proper and urgent scrutiny. In the light of my arguments, I commend new clause 10 to the House.
Nigel Mills
It is a pleasure to speak in this debate. I rise to address the new clauses that my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) spoke about and new clause 6. I will begin by speaking to the new clauses tabled by my right hon. and learned Friend and the measures tabled by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who co-chairs the all-party group on anti-corruption, on the failure to prevent economic crime.
The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) knows far more about such things than I do, and he made his argument well, but I reinforce the point that there is a strong feeling among the public, because if large companies are seen to be part of some very serious criminal activity, people are confused about why those companies and the senior people within them have not been prosecuted for those serious offences. If people look across the Atlantic, they see that America does manage to prosecute senior bankers for such offences, so they think, “We see all our banks being fined in America for being guilty of rigging various markets, yet why are no senior directors of those companies being prosecuted here? Why are those banks not being prosecuted?” That exposes the fact that our law, as the hon. Gentleman explained, has become out of date. It seems horribly unfair that the Serious Fraud Office finds it comparatively easy to prosecute very small companies and their directors, when it is clear who the controlling minds are, but that when we see far more serious offences being committed by, on behalf of, or for the benefit of much larger companies, we cannot quite find enough evidence to prosecute those companies or their very senior directors.
Mark Field (Cities of London and Westminster) (Con)
In the US context, does my hon. Friend accept that there is often a political element there, despite the division of power? The prosecutor is often looking to make a name for himself by taking on a big bank—often, it has to be said, a big non-US bank. It is a particular concern—not just in the banking world but beyond—that overseas companies tend to be fair game as far as prosecutions are concerned. There is actually a rather different regime there, and it might not necessarily point to a desire and a need for a change in UK law.
Nigel Mills
I agree with my right hon. Friend’s point. It is interesting that the United States seems to favour prosecuting large banks and large companies that are internationally owned rather than US-owned. I am sure that the Foreign Office is trying to work out whether that is an unfair, anti-competitive move by the US. He is right that we should not try to read too much across from the US system into ours, but I was trying to make the point that people are confused about why people are prosecuted in the US but not over here.
That takes me back to the point that it seems unfair that while we can prosecute directors of small businesses, we cannot prosecute when we see much more serious offences in large businesses. That is why I support extending the model of the failure to prevent that we already have in place for bribery and that we are adding for tax evasion. We are talking about other very serious economic crimes, and it is hard to make a distinction as to why we would rank some of these offences as less important or serious such that we do not take the power to prosecute so that we prevent serious fraud, for instance.
I welcome the Government’s consultation on those issues, and it is right that it would be somewhat premature to legislate before we get the outcome of the consultation, as that might make a mockery of the idea of consulting. It is a real pity that although this Bill is the ideal vehicle in which to act, we cannot, because of the timing, make the change that we want. We will be relying on another relevant Bill being introduced later in this Parliament so that we can finally make the change. As my right hon. and learned Friend the Member for Harborough said, it would be helpful if the Minister would make some encouraging noises about how seriously the Government take such matters and when we might expect to see some progress following the consultation, if the Government were minded to proceed with legislation.
I will take a bit of a leap from that topic to the subject of new clause 6—our grouping is interesting. For quite a long while, I thought that I was supporting Government policy by encouraging our overseas territories and Crown dependencies to adopt the same transparency regarding beneficial ownership that we are putting in place for the UK through the Bill. The previous Prime Minister was absolutely right to make efforts to get those territories and dependencies to agree to having transparent registers. I think that we all welcome the fact that the territories have moved a fair way in agreeing to have registers and reliable information on the beneficial owners of companies operating there. We all congratulate them on that, and look forward to that being in place; we all recognise that it will be a great step forward for various law enforcement authorities to be able to get that information relatively speedily to help prosecutions here. However, that does not go far enough, and we recognise that by saying in new clause 6 that we want a transparent register.
Mark Field
My hon. Friend makes a strong and powerful case, but does he not recognise the distinction between privacy and secrecy? No one wants an entirely secret element, but most people who indulge in banking, whether in an overseas territory or anywhere else, expect a certain amount of privacy. There is no question but that we would expect law enforcement, the police and the tax authorities to have access to these registers. My hon. Friend has been fair in making the point that ultimately a lot of these issues should be constitutional questions for the territories; these measures should not be imposed on them by the UK. On the notion that anyone should have access to that information beyond the authorities I mentioned, as they would in his Tajikistan example, surely he can understand the reluctance for that to happen, particularly in the globalised financial world in which we live, and particularly if the same does not apply elsewhere.
Nigel Mills
I accept that we hear the privacy argument a lot—I am sure that it is made in the UK context as well—but we have taken the decision to have transparent registers so that we know who the ultimate beneficial owners of these entities are. If I think through the scenarios in which people would have a right to privacy, I can perhaps see that there might be a good reason not to publish if there is a real issue of individual safety, but I struggle to find many other situations for which there is a good argument for people being able to establish entities or other bodies in the overseas territories without being clear about who the ultimate owner is. If someone owns a company here or is a shareholder, that has to be public. That transparency exists for any kind of entity here, so I am not sure why a different argument ought to apply for our dependencies. In weighing the right to privacy against the right to ensure that we are not letting dirty, corrupt, criminal money into the system, we have to err on the latter side of the equation.
Mr Wallace
My hon. Friend gave the example of a toll road in Tajikistan. Because of where we are now, with a commitment to central registers and automatic access for our law enforcement agencies to those registers in countries such as the BVI, we could investigate his example and those responsible could be tracked down. Because it is an offence under the Bill to encourage tax evasion, even in another country—I guess the people who siphon off the toll money are not paying taxes in Tajikistan—we could take action if the BVI bank had a British nexus. We have now gone a long way towards tackling that type of crime because of this Bill and where we have got to since David Cameron’s summit.
Nigel Mills
I am grateful to the Minister for making those points, but we should be careful that we do not focus only on one example. There might be good commercial reasons in that case and it might just be a rumour from that country. I was highlighting the question of whether there are sufficient resources in the various law enforcement bodies, either here or elsewhere, to pursue inquiries through the labyrinth of corporate structures that tend to be involved when it comes to the most complex money-laundering or corruption situations.
The advantage of transparency, and one reason why we have chosen to have it here, is that it puts the information into the public domain so that various NGOs or other bodies can do some of the initial investigation, piece together the corporate chains and links, break the corporate veils, and thereby work out where this money is coming from and where it has got to. I am a little sceptical that our law enforcement bodies will ever have the resources to start that process in the vast majority of cases. If we can get the information into the public domain and give people the chance to trace it all the way through and find the answers, that new information can be used by the law enforcement bodies. That is what we are trying to achieve, because enabling transparency will make it much harder to hide the money through a complex structure going through multiple territories and however many different trusts and entities.
It is entirely right and welcome that law enforcement bodies will have timely access to information, but that will not be enough to enable the full tackling of this scourge that we would like to see. That is why I support the effort that has been made with new clause 6 to find a way to send a very strong signal to our territories that we want transparent registers. That is the right thing to do and it is the right direction of travel for the regimes in question. We want our territories to take the lead, rather than waiting for everybody else to do something first. Let us set an example and move first, and not wait for the herd.
Caroline Flint (Don Valley) (Lab)
It is a pleasure to follow the hon. Member for Amber Valley (Nigel Mills). I almost feel like not making a speech and sitting down now—but I will not—because he made such excellent points about why public registers of beneficial ownership in our overseas territories are so important. I look forward to working with him on this issue and on public country-by-country reporting, as well as with the many other colleagues from both sides of the House and from eight political parties who support new clause 6. Despite some Government pressure, several Conservative MPs support the new clause, including the former International Development Secretary, the right hon. Member for Sutton Coldfield (Mr Mitchell), who I understand hopes to catch your eye, Madam Deputy Speaker. I also pay tribute to my right hon. Friend the Member for Barking (Dame Margaret Hodge) for her hard work on this important amendment. I am really sorry—and she is too—that she cannot be here today to speak in this debate. I hope that, on this occasion, Members will not mind me dubbing new clause 6 “the Hodge amendment”.
I welcome the Government’s Criminal Finances Bill. Its aims of tackling corruption, tax evasion and terrorist financing are really important and should be commended. However, the absence of any mention of the overseas territories is remarkable. As Christian Aid has said, the No. 1 thing that the Government can do to tackle corruption, money laundering, and tax evasion is to ensure transparency in their overseas territories. Unfortunately, the secrecy that those territories trade in facilitates the corruption and the aggressive tax avoidance and tax evasion that we are all trying to stamp out.
The amendment is supported by the all-party groups on responsible tax and on anti-corruption, Christian Aid, Global Witness, Transparency International, Action Aid, Publish What You Pay, Save the Children, Oxfam and many others. We all know from numerous polls that this matter is something that the British public really care about. Two thirds of them want the Government to insist on public registers of beneficial ownership in the overseas territories.
As the hon. Member for Amber Valley mentioned, we have, with this amendment, responded to concerns raised earlier at different points of debate on this Bill. We are focusing purely on the overseas territories where the constitutional issues are more clear cut. We recognise that the overseas territories are taking steps towards private registers of beneficial ownership, so we have allowed a generous timeline for them to move from that to make these registers publicly accessible.
The overseas territories need to have these private registers in place by June of this year. This amendment would give them another two and a half years after that, which is within the lifetime of this Parliament, simply to make those private registers public. Such a move would be a major step forward.
New clause 6 is important not only for us in the UK, but for developing countries, which is why so many NGOs are supporting it. According to the UN Conference on Trade and Development, developing countries lose at least $100 billion every year as a result of tax havens. Around 8% to 15% of the world’s wealth is being held offshore in low tax jurisdictions, many of which come under our jurisdiction. A World Bank review of 213 big corruption cases found that more than 70% of them relied on secret company ownership. Company service providers registered in UK territories were second on the list in providing these companies. Oxfam has said recently that around one third of rich Africans’ wealth is currently sitting in offshore tax havens. If all that wealth was held in Africa and taxed properly, we would be able to pay for enough teachers to educate every child in Africa.
It damages our reputation, as the hon. Member for Amber Valley said, that the British Virgin Islands was the most mentioned tax haven in the Panama papers. We know that future leaks are coming, so why cannot we get ahead of the game and ensure transparency now?
In a recent debate on the Commonwealth Development Corporation Bill, the Minister of State, Department for International Development, the hon. Member for Penrith and The Border (Rory Stewart), said that the CDC would never invest through Anguilla or the British Virgin Islands. If a DFID Minister and the CDC can say that, what does it say about our responsibility today to change that reputation—British Ministers are clearly considering this—and do something to help those territories become more transparent?
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
My right hon. Friend is making an incredibly strong point. I, too, was pleased to add my name to new clause 6—I am sorry that I have not been able to join her for much of this debate. Does she agree that this is all about the consistency of approach? We talk about trying to reduce the need for aid in certain countries, and a key way in which to do that is to ensure that countries can generate their own revenues by having tax paid properly in their own jurisdictions?
Caroline Flint
I absolutely agree with my hon. Friend and I thank him for his support and for putting his name to new clause 6. Aid is important, but more important is the question of how to create self-sufficiency so that more countries that are recipients of aid can stand on their own two feet. Transparency regarding overseas territories and our own system is an important part of that, as is good governance in the countries in question. Unfortunately, some countries to which we supply aid could do a hell of a lot more to help their own citizens. This is an area where we can have a direct impact and start making significant changes right now.
Stephen Doughty
Does my right hon. Friend agree that there is a conflict here? On the one hand, different Labour and Conservative Governments have been very sensible in supporting tax systems and tax authorities in many developing countries. However, if transparency of information—on companies, how they are incorporated and so on—is not available, even if we are giving them support, they cannot get to the bottom of where their taxes are actually going.
Caroline Flint
If we do not have the tools to make the difference, we are not going to see the change that I think everyone across the House wants to see. Without full access to transparent information, investigators will not know what information to request through these agreements, and that is fundamental. That is why public access to the data is important and why David Cameron was exactly right to demand it.
When the Minister responds, I expect him to say that the overseas territories are making real progress on this agenda and that including them in the legislation is not necessary. Let us be clear about the progress that has been made since the former Prime Minister first asked the overseas territories to consider public registers of beneficial ownership back in October 2013. More than three years on, just one overseas territory, Montserrat, has committed to a public register. Hooray for Montserrat! The rest have delayed at every step. Is the Minister satisfied with that outcome, and how does he account for why progress has been so slow?
In April 2014, the then Prime Minister wrote to overseas territory leaders, asking them to consult on public registers. Not all of them even did that. In July 2015, the current Chief Secretary to the Treasury, the right hon. Member for South West Hertfordshire (Mr Gauke), asked those overseas territories with financial centres to develop plans for central registers by November 2015. That deadline was not hit. Press reports last year said that the overseas territories were ignoring Foreign Office Ministers’ letters and meeting requests. At the most recent meeting with overseas territories’ leaders in November 2016, public registers of beneficial ownership were not even mentioned in the final communiqué. That raises the question whether we would have made as much progress as we have if the Panama papers had not been released.
Mr Wallace
The right hon. Lady is not being very charitable. Actually, we have achieved an awful lot since David Cameron’s summit. While the registers are not public, we will this year achieve a central register of beneficial ownership in all the overseas territories and Crown dependencies, and where they have needed help in getting there, we have given them help. The hon. Lady said that the issue of the public register had not even been raised. I can tell her that I had a meeting with the overseas territories and Crown dependencies two weeks ago, and I raised it then.
Caroline Flint
I thank the Minister for that information, because I did go and read the final communiqué from the meeting in 2016, and while there was some mention of beneficial ownership and private registers, nothing in the communiqué mentioned any journey from private to public registers—the point I made a little earlier. I do welcome the progress that has been made, but, as I will go on to suggest, unless we link the efforts being made on private registers to the endgame of public registers, I fear that we will still have some of the problems that so many people on both sides of the House and outside it have been worried about for some years.
Mark Durkan (Foyle) (SDLP)
The Minister has just told us that he did raise the issue of making the register of ownership public. If he was prepared to raise that issue two weeks ago, and if he is prepared to adopt that role of encouragement, would it not be better for him if he was supported in future by this Parliament through the very new clause we are debating?
Caroline Flint
I thank the hon. Gentleman for his intervention. Part of having this debate, and part of looking at ways to rephrase the original amendment, is about strengthening the arm of Ministers to say, “Look, we welcome the efforts on central registers, private registers and the automatic exchange of information, but we are on a journey. This is not the endgame; this is part of a journey to where we want to get to.” It would be helpful to hear from the Minister what the reaction was to the discussion of public registers at the meeting he mentioned.
The issue of central registers is important because, while there may be private registers, information may be held in different places. Private central registers are important because it helps to make things clearer, even in the private situation, if those who ask for information are able to get it. Also, if we do not have central registers, it will be even harder to make that journey to public registers if we want to do that in the future.
So how many of our overseas territories will provide central registers? Will the British Virgin Islands register be central? Not all of the overseas territories have indicated that this is the route they want to go down. That is why Ministers should be talking to them now about the journey to public registers. This is about the journey we are on. The way the private registers are put together, how they are held and how easy it is to access them for those who are going to have to ask for access are all pertinent to a future where public registers are available.
When the Minister responds to the new clause, I expect him to say how complicated this all is constitutionally. None of us who has signed the new clause wants the Orders in Council to be used. They are there as a backstop if the Government are unsuccessful in persuading the overseas territories to publish their registers. As I have said before, the new clause gives the overseas territories until the end of 2019 to act on their own.
However, the fact is that we cannot remove the possibility of using Orders in Council if we want to see more progress on the transparency agenda. The constitutional position on the overseas territories is very clear. A 2012 Government White Paper said:
“As a matter of constitutional law the UK Parliament has unlimited power to legislate for the Territories.”
There are multiple examples of the UK legislating for its overseas territories. In 2009, the UK imposed direct rule in the Turks and Caicos Islands, following allegations of corruption. In 2000, the UK Government decriminalised homosexual acts in the overseas territories using Orders in Council. In 1991, the UK Government, by Order in Council, abolished capital punishment for the crime of murder in Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat, and the Turks and Caicos Islands. The exception was Bermuda, which is generally considered the most autonomous overseas territory, but the UK Government threatened to impose change, which had the desired effect of ensuring changes in domestic legislation.
On Second Reading and in Committee, the Minister was very clear that he wanted to see public registers in the overseas territories and was working to get them, so why has he scaled back on his ambitions in recent weeks? Undoubtedly, the UK Government need to work closely with our overseas territories to help them to diversify their economies away from a unique selling point of secrecy, and that will require a great deal of support.
As we look ahead to a global, post-Brexit Britain, let us seek to lead the world rather than just follow. Let us ensure that transparency is increased. Let us ensure a fair playing field for businesses and individuals across the world. Let us ensure that tax cheats, corrupt individuals, terrorists and organised criminals have nowhere to hide. For the benefit of UK taxpayers, for people in the developing world, and for the UK’s reputation and that of our overseas territories, let us not miss this opportunity. For all these reasons, I urge the House to support new clause 6.
Mr Mitchell
New clause 6 is an important probing amendment. I very much look forward to hearing what the Minister says before I decide whether to vote for it. One of the most important aspects of the Bill is tackling corruption and standing up for openness and transparency. The Government deserve enormous praise for the work that they have done—landmark work, really—not only here but in the G20, in trying to tackle corruption. That is what this new clause is about.
Conservative Members join the right hon. Member for Don Valley (Caroline Flint), who spoke to the new clause very eloquently, in saying how much we regret that the right hon. Member for Barking (Dame Margaret Hodge) cannot be here today. Given the reason for that, I hope that she will send the right hon. Lady the House’s best wishes. I should correct her on one point. She said that Back Benchers signing this new clause might have been leant on by the Government or were signing it in spite of being leant on. I am happy to confirm to the House that no one has tried to lean on me in this respect.
I think that the Minister will have to do a little better than in his response to my hon. Friend the Member for Amber Valley (Nigel Mills) on his Tajikistan bridge example, because my hon. Friend was absolutely correct. The Administration of Tajikistan may well be colluding with the owners of the bridge, but that is not the point—the point is to enable civic society to hold the powerful to account. That is why we support transparency. That is why, when I had the privilege of being Secretary of State for International Development, we introduced the transparency initiative. We put everything we possibly could into the public domain. It is why we should all support a free press. Although it may be rumbustious and unruly from time to time, a free press is nevertheless a bastion of our liberties. Sunlight is the best disinfectant. A lot of the stuff that is the subject of this new clause leaks out anyway in the back pages of Private Eye or whatever. It is much better to put the whole thing on a formal setting and have it made public. The Government, particularly the former Prime Minister and the former Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), and my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) in his capacity as the anti-corruption tsar, have made huge progress on this.
Will the Minister give us the flavour of the Government’s thinking on the slightly differing treatment of the overseas territories and the Crown dependencies? It would be helpful for the House to understand that. During the run-up to the tabling of this new clause, I was visited by officials of no fewer than five of the dependent territories, supported by the Falkland Islands, although I think that that was a matter of solidarity rather than direct interest. They made some very important points, which no doubt we will hear about from my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham), who chairs the all-party British Virgin Islands group. First, they say that if they have an open public register, they will suffer a competitive disadvantage—and that is true. Their answer is that if they are going to do it—they do not have an objection in principle to doing so—they think that everyone else should do it as well. They point out that the potential effect on their income, which could reduce quite substantially, might well push them back into dependency. That is a fair point. The Government’s answer should be to try at all times to narrow the footprint of the areas that can hide behind secrecy.
Robert Neill (Bromley and Chislehurst) (Con)
It is a pleasure to follow my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), who speaks with great authority and commitment on these matters. I will come on to a practical matter on which I disagree with him, although I do not disagree with the objective that he seeks to achieve.
I endorse the thrust of the Bill, as my right hon. Friend has just done, and the observation—it is worth repeating, and it is all the more important as we look towards the world as it will be after we have left the European Union—that Britain is a world leader in transparency and effectiveness at dealing with financial crime. My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) was right to stress the value of the Serious Fraud Office’s work. It is extremely successful and highly regarded the world over, not least because it is operationally independent of any investigating authority. Many of us believe that it would be quite wrong to do anything to change that arrangement. The SFO works well as currently constituted, and it has an international reputation as a leader precisely because of that important independence.
I turn to new clause 6. I have much sympathy with what the right hon. Member for Don Valley (Caroline Flint) has said, but I do not think that new clause 6 is an appropriate or proportionate way to achieve the desired objective. Let me set out why. Before I do so, I should declare an interest as the secretary of the all-party group on Gibraltar, one of the British overseas territories, and I am also a member of the all-party group on the Channel Islands, which are Crown dependencies. Crown dependencies are not covered by new clause 6, but they are covered by other new clauses.
My concern is that the way the argument is put assumes that all the overseas territories should be lumped in together, which I do not think is fair. I particularly want to address the position of Gibraltar. Its position is different, first, because of the nature of its constitution and, secondly, because unlike other overseas territories—I do not criticise or make any comment about them—it is, in effect, part of the European Union. As part of the European Union, it has had to comply, and has done so willingly, with international and EU standards in the same way as the UK.
It is important not to lump Gibraltar in with other jurisdictions where there has been controversy. I say that specifically—it is important for the House to have this on the record—because I am afraid that some politicians on the other side of the land border in Spain unscrupulously seek regularly to slander Gibraltar and its constitutional and legal arrangements, doing so wholly unfairly to advance an unjustified claim against Gibraltar. I would not want anything said in this House in any way to give comfort to people seeking to do down a loyal and effective British territory, so we need to draw such a distinction.
There is a twofold point to be made about Gibraltar. Although I accept the 2010 White Paper’s observations about what can be done, I argue that it is undesirable to contemplate legislating, certainly in Gibraltar’s case, because to do so, even by Orders in Council, would have the effect of abrogating the 2006 Gibraltar constitution. The constitution gives Gibraltar, and the democratic and elected Gibraltar Parliament, entire home rule in matters relating to its economy and domestic legislation, save only those matters reserved to be exercised by the Governor on behalf of the British Crown.
Caroline Flint
I apologise to the hon. Gentleman, who should be “right honourable”. I absolutely agree that it is very welcome that Gibraltar has complied not only with the EU initiative, but with the OECD as well. I would gently ask him, however, why Gibraltar is not in favour of following the UK route of having a public register of beneficial ownership?
Robert Neill
The reason was very properly and sensibly set out by my right hon. Friend the Member for Sutton Coldfield. There is a risk of a competitive disadvantage, and as I have said, we must bear in mind the situation in which Gibraltar finds itself. I suggest it would be inappropriate for it to be at a competitive disadvantage compared with other Mediterranean jurisdictions, some of which are not well disposed towards it.
Gibraltar has done a great deal, and continuing dialogue is a sensible way forward. It would not be appropriate to legislate, particularly as undermining Gibraltar’s constitution, even if it was legally possible theoretically—I suspect it would be challenged in the courts—would be most undesirable politically, because our commitment to Gibraltar must be made particularly clear as we leave the European Union.
It is worth adding that Gibraltar has taken very considerable practical steps and has been recognised internationally for doing so. It is worth simply saying that it has transposed all the necessary EU directives into its law—perfectly willingly, without any difficulty and of its own volition—and it has also complied with all OECD initiatives in this regard. It has gone beyond that to establish a central register, under the terms of the fourth anti-money laundering directive, for which the deadline is this June. It has entered into an exchange of notes to accelerate access to all UK authorities for investigative purposes. It has agreed to the EU5 proposal for the automatic exchange of beneficial ownership with participating countries, covering all EU countries, including Spain. Gibraltar has therefore been extremely willing to co-operate, even with countries that do not always behave well towards it, and that needs to be recognised. The Gibraltar Government are actively looking at the 5 July 2016 EU proposal to amend the fourth anti-money laundering directive by introducing a register, and that ought to be their decision. As I think the Minister would confirm, Her Majesty’s Government have worked very closely with Her Majesty’s Government of Gibraltar on this issue. A constructive dialogue is taking place, which is the right way to deal with it.
Finally, before I move on to Crown dependencies, it is worth saying that Gibraltar’s record of effectiveness in the exchange of information was recognised by the 2014 OECD “Phase 2” review, when it was ranked as largely compliant. That is actually a very high ranking, which ranks Gibraltar as being as good in terms of compliance as the United Kingdom, the United States and Germany. Gibraltar, therefore, is doing the job. That really needs to be stressed, so that others do not misuse the linkage, which, in Gibraltar’s case, is not borne out by the evidence: it has some 135 tax information exchange mechanisms with some 80 countries; it has already implemented the Financial Action Task Force recommendations with the United States and the United Kingdom; and it is implementing common reporting standards, the global standard, along with the UK and other countries. I therefore suggest it would be heavy-handed and inappropriate to involve Gibraltar in this approach when it is already doing so much.
I would like to touch on the Crown dependencies, as did my right hon. Friend the Member for Sutton Coldfield. Frankly, I think the constitutional position is more difficult because they are not, and never have been, subject to the United Kingdom. Their allegiance is purely to the British Crown, not the United Kingdom. The difficulty of attempting to legislate for them would be real and profound in constitutional terms. That is why the relationship falls under the Ministry of Justice and their legislation is signed off by the Privy Council. The new clauses that seek to bring them into the position here are not well-conceived legally in that regard. That is the key issue.
It is also worth observing, since the Justice Committee recently visited all three Crown dependencies as part of an inquiry, that they, too, are up to the highest standards of reporting and ensuring information is readily available to the authorities. It is worth saying in relation to Jersey, but it applies to them all, that a report by Moneyval, an established body of international repute, stated:
“Jersey’s combination of a central register of the UBO with a high level of vetting/evaluation not found elsewhere and regulation of TCSPs of a standard found in few other jurisdictions has been widely recognised by international organisations and individual jurisdictions as placing Jersey in a leading position in meeting standards of beneficial ownership transparency.”
Similar provisions, in different legislative forms, have also been made in the two other Crown dependencies. Again, it would be unfair, inappropriate and disproportionate to lump the Crown dependencies in with this issue.
We all share the same objective. We want to make sure there is maximum transparency and honest money in our system. For the reasons I have set out, however, I hope those who support the new clause, and other new clauses that have not yet been moved, will reflect and conclude that this is not the appropriate legislative vehicle to achieve that objective.
Sir Henry Bellingham
I, too, would like to say a few brief words on new clause 6. I declare an interest: I chair the all-party British Virgin Islands group and I am a former Minister with responsibility for the overseas territories.
I am well aware of the challenges in Africa. My right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) mentioned the Democratic Republic of the Congo. He and I will remember when Tullow Oil had its licences expropriated by the Kabila Government. It transpired that the interface company was a BVI-registered shell company in which Kabila, and part of Zuma’s family, had shares. It would have been very useful if we had been able to confirm that at the time.
I entirely accept that looking to the future and envisaging public registers across the world makes a lot of sense. What I am very worried about—this is the only point I am going to make—is that if new clause 6 is passed and territories like the BVI lose their business model, there would be a massive exodus by legal services, accountancy firms, banks and so on. They would have to then rely on tourism, and it could well be that they move back to being dependencies.
The other issue is this: would it solve the problem? No. The companies registered in the BVI, the Cayman Islands or the Turks and Caicos Islands would simply register elsewhere in countries that do not have public registers. They would go to Panama or Colombia. Indeed, I saw recently that the United States, Hong Kong and Singapore have said specifically that they will not bring in public registers until the rest of the world moves on. New clause 6 is well intentioned, but we should be very mindful of the unintended consequences.
Apart from the BVI losing its business model, those unintended consequences would include, above all else, the loss of some excellent intelligence and exchange of information arrangements. For example, the BVI has in place a beneficial ownership secured search system that enables our crime and fraud agencies to co-operate immediately and confidentially to get the information required. If these companies were registered elsewhere in the world, we would lose that crime-busting capability.
Nick Herbert (Arundel and South Downs) (Con)
I rise to support new clause 6, to which I added my name in the full confidence that I was merely endorsing what I understood to be Government policy on ensuring transparency on these matters in the overseas territories, that policy having been announced by the previous Prime Minister. I find myself genuinely puzzled, therefore, about why that is apparently no longer Government policy, and I wish to raise some issues and put some questions that I hope the Minister can answer so as to reassure me and other hon. Members who have supported the new clause in good faith that there are good reasons why it should not go forward.
First, I thought that the argument about transparency had been established. My right hon. Friend the Member for Cities of London and Westminster (Mark Field) suggested that transparency would, in itself, be an undesirable thing for the overseas territories to have to undertake, but it seems to me that we might well have applied that argument to the position in the UK. Had we accepted that argument, we would not have taken action here in the UK to require transparency.
Mark Field
It is fair enough that I be allowed to defend myself. I was making the point that while I favoured full transparency towards law enforcement agencies and the tax authorities, I did not support there being a full, open and public register at this stage, because I supported the idea of banking privacy.
Nick Herbert
I am grateful to my right hon. Friend for clarifying what he said, but my point still stands, which is that we have taken action in the UK to require such publication. Why is it right in the UK but wrong in the overseas territories? That was the point I was seeking to make. Perhaps the Minister can explain.
Secondly, I understand that constitutional objections have been raised to the new clause. The argument is that it would be wrong to insist that the overseas territories take action. If so, why did we propose it in the first place? As a result, hon. Members like me now find themselves on the wrong side of the Government’s opinion, when we thought we were supporting a policy in our manifesto. If there is a constitutional objection, was it not surprising that the previous Prime Minister announced the policy of transparency for the overseas territories?
Is it even right that the British Government never impose policies on our overseas territories? In 2000, the Government, by Order in Council, decriminalised homosexuality in the overseas territories. I doubt that many Members would oppose that policy, although I suspect it was opposed in many of the overseas territories. Do hon. Members say that the British Government were wrong to do that? Murder might still be a capital offence in some of the overseas territories had the Government not insisted on the abolition of such capital crimes in 1991. The principle is established that the Government are constitutionally entitled and have in practice, where there is an overriding public policy justification, legislated in relation to the overseas territories.
The third argument advanced against this measure is that the overseas territories are doing it anyway. We are told that it is not necessary to back new clause 6 because the overseas territories are well on their way to doing the right thing, but that takes us back to the question of what it is that they are doing. If they are producing registers, that is welcome, but my question still stands: why did we think transparency was a good thing, but now no longer believe that it is a good thing? We have reset that bar. We are now saying that the overseas territories are on their way to doing the right thing, but the right thing is now defined merely as the register, and it is no longer transparency.
I think the reason this has happened has been revealed by some of my hon. Friends for entirely honourable reasons, and it is that some of these overseas territories and therefore some of my hon. Friends fear that there will be a competitive disadvantage for the overseas territories if they are required to produce a public register as the new clause suggests, in the way they will eventually be required to do, and as the Government suggested at one point that they should.
However, let me say simply that if we accept the argument that being at a competitive disadvantage is an obstacle to taking measures against tax evasion or corruption, this House would do very little on those issues. It can always be argued that we could be putting our own banking arrangements or those of other countries at risk by taking steps deemed to be in the public interest on the grounds that they could produce corruption. To turn that around, if we accept the argument on competitive disadvantage, there would be no reason why the House should not reverse all the measures taken on banking transparency and establish some sort of regime that used to pertain in countries like as Switzerland where there would be wholesale banking secrecy, because that would be good for business and it would place us at a competitive advantage by comparison with other countries. It could be argued that such a thing would be entirely acceptable.
Clearly, that would not be acceptable. We have taken the opposite view: there is a reason to demand transparency and that transparency is essential in order to tackle corruption. We are talking about measures that are necessary to protect not just the UK taxpayer but the poorest countries in the world, which are disadvantaged and penalised because people are able to siphon off funds unlawfully and immorally and shelter them in various regimes. We are apparently saying that we are willing to accept that, because if we take action against it, some other regime will perform that immoral task. That seems to me to be a wrong position for the House of Commons to take, and if it were accepted, we would not have a Bill such as this one or any transparency measures at all.
I therefore hope that the Government will reconsider their position. New clause 6 is entirely reasonable, providing a period of time for the overseas territories to comply with the transparency requirement. I, for one, will take a great deal of convincing that something that was held by the Government to be desirable and that we hold to be desirable and right in our own country is wrong for the overseas territories.
Mark Field
I have spent the last 16 years as the Member for Cities of London and Westminster, and six of those years as an adviser to an international law firm with a substantial Isle of Man presence—Cains. Over the last two years, I have been the vice-chairman for international affairs for my party and have therefore had many dealings with and much knowledge of these sorts of issues.
I fervently agree with the right hon. Member for Don Valley (Caroline Flint) and my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) that there has been a significant journey—indeed, a massive change—with respect to the mentality around beneficial ownership, getting registers together and having a certain openness about those registers. It is a journey that is ongoing.
I think it realistic to believe—my hon. Friends the Members for Bromley and Chislehurst (Robert Neill) and for North West Norfolk (Sir Henry Bellingham) presented some powerful arguments in this regard—that there is a real risk of competitive disadvantage applying to a number of the overseas territories. As my hon. Friend the Member for Bromley and Chislehurst pointed out, and as was recognised by the right hon. Member for Don Valley, the Crown dependencies are in a different legal and constitutional position. They are not part of the United Kingdom. They have their own legitimate and democratic Governments, and I think it would be quite wrong for the Government to railroad them, whether by means of Orders in Council or through the Bill.
My instinct is that we shall return to these issues. I support the Government: I do not think that the time is ripe for a provision such as new clause 6. It would, however, be wrong to assume that a huge amount of work has not been done quietly behind the scenes. I know from my own experience, and the experience of many other people, that in recent years there has been a sea change in the attitudes of a number of the overseas territories, and certainly in those of the Crown dependencies, many of which are ahead of the game when it comes to elements of the transparency agenda. I think there is a real risk—which was very well described by my hon. Friend the Member for North West Norfolk—that if we were to impose this provision on the overseas territories in such short order, a huge amount of business would leave those shores. Some would say, perhaps with some legitimacy, “We do not want to have this business here.”
I believe that we should continue the work of recent years, and consider global protocols that would prevent competitive disadvantage from coming into play. Surely that would be a better regime. I think it entirely wrong to perceive all our overseas territories as terrible tax havens where illicit work goes on. They have an astonishing amount of technology, which I have seen at first hand in, among others, the British Virgin Islands and the Cayman Islands, to enable them to co-operate instantaneously with law enforcement and tax authorities in the event of any suspicious transactions.
I hope that new clause 6 will not be pressed to a vote, or that the Government will win if it is. However, I also hope that the Minister will give us some idea of how he sees the future, given the ongoing conversations about a global protocol that we could all support.
Richard Arkless
It is an honour to follow the right hon. Member for Cities of London and Westminster (Mark Field). His homeward commutes on Thursday evenings fill me with the utmost envy. Perhaps he would enjoy my regular seven-hour journeys up and down. However, he made a very interesting speech. Indeed, the contributions from Members on both sides of the House have been very informed and enlightening.
I do not want to take up too much time, but I want to touch briefly on some of the new clauses before I hand over to the other Front Benchers. New clauses 2, 3, 14, 15 and 4 extend the principle of corporate economic crime, which has been discussed at length today. The Bill incorporates a failure to prevent such crime, but only in relation to tax evasion. As others have said, it would appear sensible, given the current climate and the public mood, to extend that provision so that the liability reaches the tops of organisations.
I have mentioned this in the House before, but, as a lawyer who had some in-house experience working for a large retail bank, I can say with the utmost certainty that sticking one’s head above the parapet and telling the bank that it is wrong is not the course of action that is most conducive to one’s career. I did not fall foul of that myself—I avoided that particular pitfall—but I think that I probably would have done so at some future time.
I think the public would demand that the concept of corporate economic crime be extended beyond tax evasion. I think they would be surprised to learn that the bank would not be held liable for LIBOR-rigging, for instance. Of course, the individuals concerned were prosecuted under different laws, but there was no corporate criminal liability for the boards of directors or for the banks themselves. I do not think the public would thank us for a corporate economic offence that extended only to tax evasion. It is tax evasion, for goodness’ sake. I think the public would expect companies such as banks and other large organisations to be held criminally liable for something as obvious as tax evasion. It is a great shame that the Bill has not grasped the nettle. The Minister may, of course, have something miraculous to say. I suspect, however, that we are not going to have an extension of corporate economic crime, which is a real shame.
Dr Huq
This group of new clauses contains a fair few of ours, so I shall take a bit longer than I did last time. I want to speak to new clauses 6, 16 and 17 and I want to press new clause 17 to a vote.
Tax evasion was big news in 2016 following the publication of the Panama papers, which threw light on certain opaque offshore companies. Following the leaking of those papers, the overwhelming sentiment was that something needed to be done, and this Bill is that something—or rather, it introduces a set of somethings to deal with the problem. It introduces new corporate offences that will no longer be reliant on the defunct guiding mind principle, it creates unexplained wealth orders and it contains some other eye-catching stuff including the failure to prevent offences under the category of a politically exposed person. It also makes necessary amendments to our pre-existing anti-terrorism legislation. The Minister has pointed out that the Bill builds on a raft of Labour-initiated legislation, including the Proceeds of Crime Act 2002, the Bribery Act 2010 and the Terrorism Acts of 2000 and 2006. On the whole, we support the Bill, and all this stuff is not to be sniffed at.
I also want to mention the new additional monitoring, which the Minister announced on the spot a little earlier, relating to the human rights abuses mentioned in our debate on the first group of new clauses.
As the Bill has progressed, however, it has become apparent that there are chinks in the armoury for fighting money laundering. We welcome what is in it, but concerns are being expressed not only in my party but by a range of charities and non-governmental organisations such as Amnesty International, Christian Aid, Traidcraft, Transparency International, CAFOD and the ONE Campaign. They are concerned about what the Bill does not contain, and the elephant in the room is the issue of beneficial ownership and the UK’s inaction in tackling the financially secretive companies and practices that lie at the heart of the economies of many of our overseas territories and Crown dependencies. Beneficial ownership is entirely not present in the Bill. It is conspicuous by its absence. In other words, I am referring to our “tax havens.” The silence seems bizarre given that we are talking about money laundering, tax evasion and terrorist financing. Whether the Government like it or not, the matter must be addressed. The issue falls within the Bill’s remit because overseas territories are facilitating, aiding and abetting financial crime. The last time I was at the Dispatch Box I said that the UK, along with its overseas territories and Crown dependencies, is the biggest secretive financial jurisdiction in the world, so we have a special responsibility to act and to lead on this agenda, not to be slightly less bad than everyone else. The UK is facilitating some of the largest and most well-known tax havens, so we should be leading not following.
When the Government have been told that they need to “get real” not just by me in Committee but by the court of public opinion after the scandalous events of last year, they need to toughen up and get a grip on overseas territories and Crown dependencies because they facilitate illicit financial activity on a global scale, but the same excuses follow and have been trotted out today: the UK does not have the constitutional legitimacy for the overseas territories and Crown dependencies; and the territories are supposedly adhering to international standards anyway, so making them adopt public registers of beneficial ownership is not necessary. We are also told that the Government do want the territories and dependencies to adopt such registers, that they are working towards that, and that in the light of the progress made the threat of an Order in Council is unnecessary.
The Government say that the time will be right when the rest of world follows the UK’s lead and that they will set a global benchmark for financial territories. At the sixth sitting of the Bill Committee, the Minister told us that only when the time is right and only when there is an international standard for public registers of beneficial ownership will it be imperative for our overseas territories and Crown dependencies to follow suit. He actually claimed that the Crown dependencies and overseas territories with financial centres are already way ahead of “most jurisdictions”, including most G20 nations, on tax transparency. We were told that they are doing enough and that now was not the time to upset the applecart with public registers, particularly when they have agreed to adopt centralised registers. The Minister may recognise his own words from Committee in response to an amendment of mine that was pretty much identical to new clause 6:
“I certainly think that these places”—
the overseas territories and Crown dependencies—
“have come 90% of the way, and we should see whether that works for us. We all have the intention”—
to adopt public registers—
“and the United Kingdom is leading by example.”
In response to our threat of an Order in Council, he said:
“The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far.”
This is the interesting bit:
“It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which…makes a real difference.”––[Official Report, Criminal Finance Public Bill Committee, 22 November 2016; c. 199-200.]
That already seems slightly contradictory.
On the one hand, we hear that we cannot legislate for the dependencies. In fact, I remember the Minister calling me—someone whose parents suffered the worst excesses of the British empire—a neo-imperialist. It was certainly the first time that anyone has called me a neo-colonialist or whatever it was. At the same time, however, we clearly are able to do something and have the option to stop turning a blind eye and to turn inactivity into activity. The Minister himself insisted that the proposal was a “strong measure” that is less preferable to his own formula of cajoling and behind-the-scenes pressure.
Mr Wallace
Will the hon. Lady recognise for once that through cajoling and peer group pressure all Crown dependencies and overseas territories will by this year have central registers of beneficial ownership or similar? That is ahead of many G20 countries that do not even have central registers. We have actually come a long way and a lot further than when Labour was in government.
Dr Huq
I listened carefully to what the Minister said, and he said something similar in response to my right hon. Friend the Member for Don Valley (Caroline Flint). I will literally eat my hat—not that I am wearing one—if that happens. The registers must be in a format that is easily convertible to public registers.
We are not there yet. As someone who conducted empirical social science research, I wonder where the 90% figure came from. I know such things are often said across the Dispatch Box—in this case, it was in a Public Bill Committee—on the hoof, in the heat of the moment, and I would not want to label the Minister as a purveyor of fake news, but does he really think that we are 90% of the way there? Even if Government Members say that we do not normally do this, there is always a time when, if needed, we can step in, and the Labour party would argue that that time is now.
Mark Field
The specific problem is about legislating for the overseas territories rather than the Crown dependencies. I think it is understood across the board that this does not apply to the Crown dependencies. We all recognise that significant progress has been made in recent years, so will the hon. Lady pledge at this juncture not to press new clause 6 to a Division? Let us see further progress in the months and years to come that will hopefully ensure that we move towards a global protocol that keeps everyone happy.
Dr Huq
First, I would like to finish what I was trying to say. I was coming to the Crown dependencies and overseas territories, which I realise are two different things. I would also like to hear what the Minister has to say, because at earlier stages of the Bill he was conciliatory and we backed down on some things.
We are dealing with not just new clause 6 but new clause 17. We are looking at both overseas territories and Crown dependencies because, internationally, the UK will be able to lecture and persuade others to adopt transparent finance practices only if its overseas territories and Crown dependencies stop engaging in—
Dr Huq
I will carry on for the moment because I want to make some progress—I am not able to get a sentence out at the moment. The hon. Gentleman will be referenced later in my speech. We worked well together under his excellent stewardship of the Justice Committee.
The previous coalition Government’s White Paper on the overseas territories has already been quoted by my right hon. Friend the Member for Don Valley. It referred to how, as a matter of constitutional law, the UK Parliament has unlimited power to legislate for the overseas territories. The phrase “unlimited power” is pretty clear. On the Crown dependencies, which the right hon. Member for Cities of London and Westminster (Mark Field) mentioned, it appears that not only the Government but the SNP, given the remarks of the hon. Member for Dumfries and Galloway (Richard Arkless), who was a member of the Justice Committee with me, have accepted, or been cowed into believing, that the Crown dependencies are somehow untouchable.
I want to quote from a report by the hon. Member for Bromley and Chislehurst (Robert Neill). The Justice Committee’s 2010 report on the Crown dependencies stated:
“the restrictive formulation of the power of the UK Government to intervene in insular affairs on the ground of good government is accepted by both the UK and the Crown Dependency governments”.
A list of examples was given, but the hon. Gentleman probably knows it better than I did, because he wrote it.
Robert Neill
It would not be unreasonable for the hon. Lady to note that I was not Chair of the Justice Committee at that time. Can she give me any example of a time when the United Kingdom has specifically legislated for a Crown dependency, as opposed to acting under the prerogative power through the lieutenant governors, which indeed itself has not been done in many years? The overseas territories are not the same as the Crown dependencies legally. I honestly urge her to reflect on that, because she is genuinely on shaky legal ground.
Dr Huq
As I have said, there seems to be a lack of will. The hon. Gentleman talked at length about Gibraltar—[Interruption.] If he will listen to what I say back to him, that might be useful. There is a lack of will to act. People have been lobbying all of us, probably including him. The fact that we have the power to make a change is more significant than examples—if this is needed, it can be done. New clause 16 does not coerce anyone to do anything, but it sets out steps that would facilitate matters.
Richard Arkless
Given the principle of parliamentary sovereignty, it is of course open to this place to legislate on Scotland. Is the hon. Lady suggesting that she would legislate on matters that are devolved to the Scottish Parliament?
Several hon. Members rose—
Dr Huq
I would like to make progress. I will not take any more interventions, because I am still at the very beginning of my speech and the Whips are telling me that they want me to conclude.
The question is not, “Can we do this?” but, “Is it right to do this?” It will come as no surprise that I think that the answer is yes. The Government’s White Paper made it clear that when the law is not working, or there has been a breakdown in order—corruption was mentioned —the UK has the power to act.
Dr Huq
It would help if Members were listening to me. How many times have I given way? Numerous times—more than anyone else in our proceedings, which have been going on for many hours—so I would like to make some progress.
Even if, as has been mentioned, it is the British Virgin Islands and the Cayman Islands that are prolific offenders—I think that the British Virgin Islands come up the greatest number of times in the Panama papers—it does not completely absolve the Crown dependencies. Several Members have tried to untangle the difference between Crown dependencies and overseas territories. The Isle of Man managed to rack up 8,000 entries in the Panama papers and is being singled out by the Canadian revenue authorities for investigation. Let us not forget that in October 2015, HMRC defeated the Isle of Man on a tax avoidance scheme that took place from 2001 to 2008 and left a hole in our finances of £200 million. That is a not insignificant sum, and it is money going from our Exchequer. How many hospitals and schools could we have built for that? I do not know the precise answer; it is a rhetorical question. In 2007, the tax havens of Guernsey and Jersey were investigated by our Serious Fraud Office in one of the biggest corruption investigations in African history. These things often join up; the money moves around.
The point is clear: the very structure of the laws pertaining to finance in these places, coupled with their deliberate adoption of complex and opaque institutional structures, is crying out for reform. Globally, these dependencies are at the heart of undermining the rule of law—something that we hold dear—in other countries due to the corruption that they facilitate. Their laws therefore clearly need to be changed, and there is undeniable scope for us to change them. As my right hon. Friend the Member for Barking (Dame Margaret Hodge), who is sadly absent, has said, there is a moral case for us to act, even if there might not be an identical incident in which we have so acted. My right hon. Friend the Member for Don Valley referred to polling that shows enormous public support for such an approach—some 80% of people in a recent poll.
The Bill Committee was told that public registers are not an international norm and that our Crown dependencies and overseas territories are somehow exemplars because they have adopted closed registers of beneficial ownership. Lamentably, that might look like a bit of an alternative fact—dare I say that. I have here a piece of paper—in fact, it is three sheets stapled together—with a list of 46 jurisdictions. Those countries are all dependencies of G20 nation states, so they are in a similar constitutional position to our overseas territories and Crown dependencies, and they all have centralised registers of beneficial ownership. Shall I read out all 46, or does the House want just a smattering? They are: the Ashmore and Cartier Islands, Christmas Island, the Cocos Keeling Islands, the Coral Sea Islands—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The hon. Lady is not going to read out all 46, is she? She has made her point most eloquently, so there is no need to list all 46. We do not read long lists in this Chamber, and the House has got the point she is making.
Dr Huq
I am most grateful for that clarification, Madam Deputy Speaker. Some of those on the list are the DOM-TOMs—the départements d’outre-mer and the territoires d’outre-mer—so there is a long list, including Guadeloupe and Martinique, but I shall move on.
It is a bit of a nonsense for the Conservative party to claim that the overseas territories and Crown dependencies are leading the world in financial transparency because of the creation of central registers if 46 other dependencies are doing that already. Not only have some been incredibly slow to catch up with the aforementioned countries, but some of our Crown dependencies and overseas territories are among the worst offenders and have not adopted centralised registers, let alone made them public. More accurately, they have adopted platforms.
The Government ask us to believe that the British Virgin Islands or the Cayman Islands will be able to police their own financial businesses by relying on those businesses, which facilitate crime. It is asking them to mark their own homework and to be judge and jury. Call me a cynic, but I doubt that that is a workable solution. Do we really believe that anonymous companies in the British Virgin Islands—which, for example, allowed the former wife of a Taiwanese President to illicitly purchase $1.6 million of property in Manhattan—would be capable of policing themselves?
There are several other examples. Would Alcoa, the world’s third largest producer of aluminium, be capable of policing itself when it has used an anonymous company in the British Virgin Islands to transfer millions of dollars in bribes to Bahraini officials? Would the anonymous British Virgin Islands-based company used by Teodorin Obiang, the son of the President of Equatorial Guinea, really be capable of policing itself when it allowed him to squirrel away $38 million of state money to buy a private jet? It was thanks to the US Justice Department that he was caught. The Government’s protestation that we are working with the territories and dependencies, and that we are 90% of the way there, is at best highly questionable.
Dr Huq
No, there is more.
The main point I want to make is that our Government should be at the forefront of the push to cast off the cloak of secrecy under which terrorists have previously been able to fund their attacks and gangsters have stored their ill-gotten gains. We should not be dragging our feet on this. Some of these jurisdictions, including the British Virgin Islands and the Cayman Islands, have hidden behind the fig leaf of the consultation.
I shall dispense with the rest of what I was going to say, but we wish to press new clause 17 to a Division—[Interruption.] If anyone had listened to me, they would know that I was largely talking about the Crown dependencies.
In conclusion, we could have gone all the way and become the gold standard for other Governments to follow. We could also have dealt with the public disquiet over perceived levels of tax evasion, which the former Prime Minister, to his credit, wanted to tackle. This massive oversight undermines not only the claims made by the former Member for Witney, but citizens in some of the poorest developing countries of the world, which are at the end of these complex supply chains of criminality. Those citizens are the main losers in all of this.
The Home Office’s press release that accompanied the publication of the Bill said that the new offences were aimed at
“sending out a clear message that anyone doing business in and with the UK must have the highest possible compliance standards.”
Although we agree with large parts of the Bill, it does, none the less, fall short. New clause 17, which Her Majesty’s loyal Opposition wish to press to a Division, would go some way towards addressing a number of these issues.
Mr Wallace
It is a pleasure to follow the hon. Member for Ealing Central and Acton (Dr Huq). I will take this opportunity to respond to the many points that have been raised in this debate. It is a regret that the right hon. Member for Barking (Dame Margaret Hodge) is not in her place, but it is for fully understandable reasons. I pay tribute to her for the work she has done in campaigning for tax transparency, and I send her my best wishes at this time.
Let me now turn to the main thrust of this debate. What has dominated our proceedings is this question of whether our British overseas territories and Crown dependencies should have public registers of beneficial ownership. I am a supporter of transparency. I was the first Member of this House to publish my expenses—long before that was required. It was not a popular thing to do at the time, but I am a great believer in transparency. I learned that from my time in the Scottish Parliament, because I am also a great believer in respecting devolution and respecting constitutional arrangements.
Let me say to my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) that we have not changed our ambition. Our ambition is still to have public registers of beneficial ownership in the overseas territories and Crown dependencies. I repeated that to the leaders of those territories and dependencies just two weeks ago, but how we get there is where there are differences. We must recognise that, ever since David Cameron held that anti-corruption summit, we have come a long way—I am not sure whether it is 90%, 89%, or 85%. I do not know the percentage—I did not do the same course as the hon. Member for Ealing Central and Acton. None the less, we now have a commitment to keep either central registers or linked registers. My hon. Friend the Member for Amber Valley (Nigel Mills) needs to recognise that it is perfectly possible to link registers and to interrogate them centrally. We aim to fulfil that commitment by June 2017.
We are also committed to allowing our law enforcement agencies to have automatic access to those registers. We already do that in some of those territories, with requests coming back within hours. As a Home Office Minister, I am charged with ensuring that we see off organised crime, tackle corruption, and deal with money laundering. I believe that our arrangements do allow us to deal with potential crime and tax evasion. If I did not think that, I would not be here making the point that now is not the time to impose that on our overseas territories and Crown dependencies. I have faith that, at the moment, the capabilities of our law enforcement agencies enable us to interrogate those systems and to follow up and prosecute those people who encourage tax evasion not only in this country, but in other countries. This Bill gives us that extra territorial reach that many other countries do not have.
Ian Paisley (North Antrim) (DUP)
Can the Minister give the House a categorical assurance that none of the money made from ill-gotten gains of criminal activity, through fuel fraud in Northern Ireland and the Republic of Ireland, is illicitly put into those countries?
Mr Wallace
We find criminals using banking systems all over the world to hide their money, whether that is in Northern Ireland, London, the Republic of Ireland, Crown dependencies or elsewhere. Such places have agreed to work with our law enforcement agencies, and we will allow their law enforcement agencies access to our databases in order to follow up such activity.
The hon. Member for Ealing Central and Acton underplays the success of the United Kingdom’s leadership role. Without imposing on democratically elected Governments in those countries and without imposing our will in some sort of post-colonial way, we have achieved linked registers and access to registers for our law enforcement agencies across many Crown dependencies and overseas territories. We might compare ourselves with our nearest neighbours, the major economies—with all due respect, I do not mean Christmas Island—such as Germany and other European neighbours such as Spain. We are the ones with a public register and we, not them, are the ones ready to have a unified central register. Perhaps we should start by looking at the major economies, rather than sailing out on a gunboat to impose our will on overseas territories that have done an awful lot so far in getting to a position in which I am confident that our law enforcement agencies can bring people to justice. That is the fundamental point of this principle. We have not abandoned our ambition. We have decided that the way to do it is not to impose our will on overseas territories.
The Labour party’s new clause 17 is probably constitutionally bankrupt, if I may use that phrase. It would certainly cause all sorts of problems, although I am not sure that we can actually impose our will on a Crown dependency like that. All the good words of the hon. Member for Ealing Central and Acton seem to have disappeared because the new clause leaves out overseas territories and would apply only to Crown dependencies. If Labour Members think that such a provision is right for Crown dependencies, why is it not right for overseas territories? I do not understand why they have left that out, although I suspect it is because, when it really comes to it, Labour Members do not know what they are talking about. If the Labour party wanted to be successful with this, it might have done it in its 13 years in Government.
I respect devolution and constitutional arrangements, and it is important to do that at this stage. Crucially, if we do this in partnership, we will get there. When we see people being prosecuted and the system of information exchange between law enforcement agencies working, we will have arrived at a successful point. I am confident that we will get there. I do not shy away from telling the overseas territories and Crown dependencies that our ambition is for transparency but, first and foremost, our ambition is for a central register that is easily interrogated by our law enforcement agencies.
Nick Herbert
I welcome my hon. Friend’s restatement that the Government remain committed to transparency. Will he give some kind of indication of a timetable, once his policy of registers is fully in place, by which he expects the overseas territories to be able to move to full transparency?
Mr Wallace
The first commitment is for the central register to be in place by June this year. Where overseas territories have trouble fulfilling that—for example, they just do not have the capacity to do it—we have offered help to allow them to do so. Hopefully that means that we will keep on target. As for setting a date for the public register, we first have to complete our own, and get it up and running. Once we know what challenges are involved in doing that and seeing how it works, we can have a grown-up discussion with our G20 partners about when they will do that. We should not just focus on the overseas territories and Crown dependencies. Major economies, including our own, are guilty of allowing people to hide illicit funds, which is why we introduced this Bill. I suspect we will find many funds laundered not in those small overseas territories, but in some major economies in the G20. That is important.
Mark Durkan
A number of the Minister’s hon. Friends used the argument of competitive disadvantage when speaking against new clause 6. That is not an argument that the Minister has addressed at the Dispatch Box. Will he assure us that he is not saying that, when the time might be right in the future, and as long as any of the territories cite concerns about competitive disadvantage, the British Government would just back off?
Mr Wallace
We do have to recognise that there is a difference between secrecy and privacy; we have to respect that and to understand when privacy is an advantage and when it is being used secretly, to create a disadvantage or to avoid detection. So the difference between secrecy and privacy is not as straightforward as it would seem. In our lives, we all deserve some element of privacy. Shareholdings in some very major private companies, for example, are not listed—they have to be declared—and that has been established for many years.
Mark Durkan
Just to clarify the point, some of the Minister’s hon. Friends said that their grounds for not supporting new clause 6 were that these territories would be put at a competitive disadvantage if they had to move to public registers. Is that the Government’s case, or is that argument being made by his hon. Friends, but not from the Dispatch Box?
Mr Wallace
The United Kingdom Government do not think they are at a competitive disadvantage, and that is why we are progressing with a public register ourselves. However, we will lead by example and by peer-group pressure; we will not lead by imposition. That is fundamentally the difference between the Government and some Members of the House. That is how we are going to get there.
Mr Wallace
No, I have to press on. I am sorry.
The damage caused by economic crime perpetrated on behalf, or in the name, of companies to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business is a very serious matter, and it comes within the area of corporate failure to prevent economic crime.
The Government have already taken action in respect of bribery committed in pursuit of corporate business objectives, and the Bill will introduce similar offences in relation to tax evasion. Both sets of offences followed lengthy public consultations, as is appropriate for such matters, which involve complex legal and policy issues.
That is why I confirmed in Committee that the Government would be launching a public call for evidence on corporate criminal liability for economic crime. That call for evidence was published on 13 January and is open until 24 March. It will form part of a potentially two-part consultation process. It openly examines evidence for and against the case for reform, and seeks views on a number of possible options, such as the “failure to prevent” model. Should the responses we receive justify changes to the law, the Government would then consult on a firm proposal. It would be wrong to rush into legislation in this area, but I hope hon. Members will recognise that the Government are looking closely at this issue, and I encourage them to contribute to the consultation process.
Let me move on to the issue of limited partnerships, which was raised by the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) and more generally by members of the Scottish National party. I am grateful for the work they have done alongside the Glasgow Herald in highlighting the abuse of the Scottish limited partnership by criminals internationally and domestically, and it is important that we address that issue. We take these allegations very seriously—only recently, the hon. Gentleman highlighted another offence to me—and that is why a call for evidence was issued on 16 January by the Department for Business, Energy and Industrial Strategy on the need for further action.
The “Review of limited partnership law” is an exciting document—I am afraid the graphics man was clearly not in on the day it was created—but I urge members of the Scottish National party to respond to it, and I know they have already done so. They will be interested in one of the questions, which asks:
“What could the UK government do to reduce the potential of Limited Partnerships registered in Scotland being used as an enabler of criminal activity, whilst retaining some or all of the aspects of those Scottish Limited Partnership structures which are beneficial?”
I know the Scottish National party will respond to that.
Richard Arkless
What can the Minister tell us about the mystery Committee that is sitting for one hour today and proposing a new type of limited partnership that will, in theory, step into the place of SLPs? That is the sticking issue for me. Is there anything he can say on that point?
Mr Wallace
Well, apart from asking the hon. Member for Kirkcaldy and Cowdenbeath how he has enjoyed his hour on the Committee, which he has gone off to attend, I think we should look at this in chronological order. The review is taking place now. Whatever it produces will, of course, be responded to. If it is responded to in legislation, that will succeed whatever is being discussed in that Committee now.
I come now to the issue of tax evasion and the Opposition’s new clause 11, which returns us to the question of corporate transparency in overseas territories. I should stress that the new offences in part 3 of the Bill already apply in those jurisdictions. First, the domestic tax evasion offence applies to any entity based anywhere in the world that fails to prevent a person acting for it, or on its behalf, from criminally facilitating the evasion of UK taxes. The overseas offence applies to any entity that carries out at least part of their business in the United Kingdom. The only circumstances in which a company is outside the scope of these offences is where there is no connection to the UK: no UK tax loss, no criminal facilitation from within the UK, and no corporation carrying out any business. In those situations, it is for the country suffering the tax loss, and not for the UK, to respond. The corporate offences are by no means a one-size-fits-all solution for every country. However, I am pleased to report that Government officials have spoken to revenue authorities, regulators and businesses from across the world about the new corporate offences, and there has been significant interest in them.
Caroline Flint
I will not press new clause 6 to a vote. I do not believe that the Minister has really answered the points that have been made by hon. Members across the House. I am sure that this matter will be picked up in the other place, and I reserve the right to pick it up once again with my right hon. Friend the Member for Barking (Dame Margaret Hodge) when it returns to this place.
Sir Edward Garnier
My new clause 2 was drafted and tabled before Christmas. Since then, I have had a number of meetings with my hon. Friend the Minister and we have also seen the Ministry of Justice’s call for evidence in relation to corporate criminal liability. In the light of what he has said this afternoon, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 17
Public Registers of Beneficial Ownership of Companies registered in Crown Dependencies
‘(1) In Part 1 of the Proceeds of Crime Act 2002 (introductory), after section 2A, insert—
“2AA Duty of Secretary of State: Public registers of beneficial ownership of companies registered in Crown dependencies
(1) It shall be the duty of the Secretary of State, in furtherance of the purposes of—
(a) this Act; and
(b) Part 3 of the Criminal Finances Act 2017
to take the actions set out in this section.
(2) The first action is, no later than 31 December 2017, to provide all reasonable assistance to the Governments of Crown Dependencies to enable each of those Governments to establish a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction.
(3) The second action is, no later than 31 December 2019, to publish legislative proposals to require the Government of any Crown dependency that has not already established a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction to do so.
(4) In this section—
“a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.
“legislative proposals” means either—
(a) a draft Order in Council; or
(b) a Bill presented to either House of Parliament.” —(Dr Huq.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Sue Hayman (Workington) (Lab)
On a point of order, Mr Speaker. I wonder whether you could advise me. I have been to Downing Street today, along with a constituent who had travelled all the way from west Cumbria to hand in a petition. Unfortunately, we were turned away at the gates. I was told that I would not be allowed to go to Downing Street to hand in a petition that had been booked in through the proper procedures. We had been offered a time to hand in a petition about health services, so it was understood what the petition was about. However, when I asked the security officer from No. 10 Downing Street why I was not allowed to hand in the petition, as had been agreed, he told me that today was “not a good day”. When I pressed him, he told me that I could hand in the petition “after Thursday”.
I am concerned that I have been prevented from handing in a petition that was properly booked in, through the proper procedures, because of a by-election, and that this has been politicised. Can you advise me, Mr Speaker, on what is my best course of action?
Mr Speaker
I am grateful to the hon. Lady for her point of order and for giving me a moment’s notice of it. She is clearly concerned and aggrieved. My initial response is to say to her that this is not a point of order for the Chair, or, for that matter, a subject for the House authorities. I understand her concern, not least in terms of personal inconvenience, and I trust that her point of order has been heard on the Treasury Bench. It is very much a matter for Ministers, with whom it has not been registered, but I repeat that it is not a matter for the Chair.
Third Reading
Mr Wallace
I beg to move, That the Bill be now read the Third time.
Financial profit is at the heart of almost all forms of serious and organised crime, which directly affects the most vulnerable in society. The Bill will significantly improve our ability to tackle money laundering, corruption, tax evasion and terrorist financing. It is a key part of the Government’s critical work to reduce the flow of dirty money into the City and to cut off the funding streams to the fraudsters, money launderers and kleptocrats.
This country is the largest centre for cross-border banking. The UK is, and will remain, a good place to do business. However, the National Crime Agency estimates that up to £90 billion may be laundered here each year. I have made it clear—as has my right hon. Friend the Prime Minister and, indeed, her predecessor—that we need to make the UK a hostile environment for those seeking to move, hide and use the proceeds of crime and corruption. In an increasingly competitive international marketplace, the UK simply cannot afford to be seen as a haven for dirty money. We must not turn a blind eye to the money of corrupt officials that flows through businesses, banks and property, and that is why the Bill is so important.
I thank the shadow Home Secretary, the right hon. Member for Hackney North and Stoke Newington (Ms Abbott), and the hon. Member for Ealing Central and Acton (Dr Huq), as well as the hon. Members for Dumfries and Galloway (Richard Arkless) and for Kirkcaldy and Cowdenbeath (Roger Mullin), for their input throughout the Bill’s passage so far. Other hon. Members have also brought considerable knowledge and expertise to the proceedings.
The Government, and I as the Minister concerned, have been determined to be open to input from all parties, and I am pleased that we have made some concessions towards addressing the issues raised. I know we have not dealt with all the concerns raised, but I hope that I have made sure that the Bill leaving this place is better than when it was introduced and that it has taken on the points raised by both the Labour party and the SNP, and indeed by my hon. Friends on the Conservative Back Benches.
We had further detailed debate of the Bill on Report today, with many well-informed contributions from all parts of the House. The debate has covered the scope of the unexplained wealth orders and other powers in part 1 of the Bill, as well as the corporate offences regarding the failure to prevent the facilitation of tax evasion.
Of course much of today’s debate has focused on issues that were not part of the Bill itself, notably the new clause in the name of my hon. Friend the Member for Esher and Walton (Mr Raab) and the right hon. Member for Barking (Dame Margaret Hodge) and others, which sought to impose sanctions on those involved in gross human rights abuse or violations overseas. The strength of feeling on this issue is clear, and the treatment of Sergei Magnitsky was undeniably deplorable.
This Government are committed to promoting and strengthening universal human rights globally. Our approach focuses on holding to account those states responsible for the worst violations of human rights and working with those states determined to strengthen protections against abuse. But we have listened to the House, and our amendment will allow for the recovery of property connected with torture or cruel, inhumane and degrading treatment overseas. This sends out the strong message that those seeking to profit from torture and other serious abuses will not be able to do so in the UK.
The House also debated the commitments made by the overseas territories to tackling corruption and money laundering in their financial systems. The UK is at the forefront of the global approach to increasing corporate transparency and tackling tax evasion and corruption. That work started under David Cameron, and it continues.
I share the desire for the Crown dependencies and overseas territories to take further steps towards full corporate transparency. That is why this Government continue to work closely with them towards that goal, but we must recognise the significant progress they have already made, putting them well ahead of many other jurisdictions.
The Bill and the wider package of measures of which it is a part will give agencies the powers they need to ensure that crime does not pay in a Britain that works for everyone. It is important that these powers are available to all parts of the UK, but, as I have said, we will await the outcome of elections in Northern Ireland before we commence the provisions there.
The need for this legislation is significant and particularly timely as we negotiate our future relationship with the European Union. Now, more than ever, we must showcase the UK as one of the best places in the world to do business, as we form new ties with international friends and partners.
Serious and organised crime costs the UK at least £24 billion annually and deprives people of their security and prosperity. We task our law enforcement agencies with combating the evolving threat from both criminals and terrorists, and I pay credit to those agencies for all the work they do on our behalf, but without the necessary powers to pursue and prevent these illicit activities, they fight a losing battle.
This Government have done more than any other to tackle money laundering and terrorist financing, but the scale of the threat is clear and we must do more. This Bill sends the clear message that we will not stand for money laundering or the funding of terrorism through the UK, and I commend it to the House.
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
We in the Opposition broadly support the thrust of this legislation, and we have noted that the Minister has proved to be a listening Minister, which we welcome.
Tax avoidance and money laundering are the opposite of victimless crimes. In the first instance, there are inflated asset prices in the territories where the money is laundered, and there is no bigger example of that than the housing market in this country, particularly in London. In some of the most expensive parts of London, we can walk down streets where most of the houses are completely empty. Some might be empty because it is the wrong time of year for their owner to be there, and others because they have been bought as an investment, but increasing numbers of those properties are being used to launder money, and if this legislation can bear down on that, it will be of value not least to people who are victims of the wildly inflated London housing market.
Tax avoidance and money laundering mean a loss of tax for some of the poorest communities in the world. I was in Ghana last year looking at tax avoidance and evasion, and I was struck by the fact that a woman selling drinks by the side of the road could pay proportionally more tax than some of the biggest drinks manufacturers in the world. These are distorted systems of taxation, and if this legislation can bear down on that type of tax avoidance, it is to be welcomed. I was pleased to hear the Minister say that we are beginning to return money to some of those territories, notably Macau. I believe that we have also signed an accord with Nigeria. Above all, this legislation is important for suppressing corruption. It is not just a law-enforcement measure; it is also, indirectly, an anti-corruption measure.
I remind the House that the genesis of the Bill was the Panama papers, which revealed extremely widespread and highly lucrative avoidance of tax on an industrial scale. There were 11 million leaked files, and Britain was the second most prominent country in which the law firms’ middlemen operated. It was second only to Hong Kong. One British overseas territory, the British Virgin Islands, was by far the most popular tax haven state used by the firms in the documents. The Minister has said that we are at the forefront of taking action on tax avoidance and money laundering, and so we should be. The UK has sovereignty over one third of tax havens internationally.
We welcome the Government’s new clause 7, which will bear down on money recycled as a consequence of human rights abuses elsewhere. We still believe that there is insufficient scope for the civil recovery of assets, and the enforcement powers in the civil recovery provisions could be improved. There are particularly important omissions regarding the penalties for offences relating to the facilitation of tax avoidance, involving middlemen such as lawyers, accountants and straightforward spivs such as those identified in the Panama papers.
On the disclosure of beneficial ownership, we feel that there is a major problem, as the lack of disclosure can help to facilitate money laundering and corruption. Let us take an example. In the Department for Business, Innovation and Skills consultation paper published in March 2016, the Government said that between 2004 and 2014, more than £180 million-worth of property in the UK was being investigated by UK law enforcement agencies as it was suspected of being funded by the proceeds of corruption. Moreover, more than 75% of those properties had offshore corporate ownership. That is believed to be the tip of the iceberg in terms of scale and of the proceeds of corruption being invested in UK property through offshore companies.
On the British overseas territories and Crown dependencies, I understand the technical argument that we cannot apply the same regime to those areas, but the moral issue is substantially the same. Some Members have spoken as though the populations of those territories as a whole benefit from financial services, but that is not the case. Only in recent years has the financial services industry been open to employing people born and bred on those islands in advisory, legal and management positions. Just because the political elites in those countries argue for light-touch regulation, let us not delude ourselves that financial services are helping the territories as a whole. We believe that the argument that we cannot impose proper standards on those territories is false. UK jurisdiction applies in all matters of defence and security, and the House has a right and a duty to see how best to impose those laws.
The people who are benefiting from the secrecy and the lack of regulation are the tax evaders and avoiders, the money launderers, the major criminal enterprises and the terrorist networks. We urge the Government to move forward on those issues. If legislation is required for onshore activity here in the UK, most reasonable people would argue that it is even more pressing to include overseas territories and Crown dependencies.
The Opposition are calling for a wide-ranging review of the UK tax gap, including an assessment of the loss of income tax due to tax evasion. As several Members on both sides of the House have said, if the legislation simply rests on the statute book and does not result in commensurate prosecutions, it will be a dead letter. We note that the Minister has listened thus far, and I hope that the Government and the appropriate Departments are listening when I urge them to ensure that the legislation amounts to more than just good intentions and that it is actively used to bear down on tax evasion, money laundering and corruption.
Mr Speaker
This debate has been concluded with notable speed.
Question put and agreed to.
Bill accordingly read the Third time and passed.