Economic Crime (Transparency and Enforcement) Bill

Lord Agnew of Oulton Excerpts

Committee stage
Monday 14th March 2022 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, we find ourselves in an unusual position. Normally, this House is trying to knock the edges off overzealous legislation and limit the powers the Government have a tendency to give themselves. In this Bill, we are trying to achieve the exact opposite: to strengthen the powers and close the loopholes so that the powers are as effective as possible.

We are trying to move quickly because of the awful situation in Ukraine. As the Minister said at the outset, the overseas entity register is not an emergency measure—although it will be useful in this situation. In normal times, it would be subject to much more detailed scrutiny, and we would not normally debate such wide groups as we are today. At Second Reading, I asked the Minister to confirm that the follow-up economic crime Bill would be sufficiently wide in scope to allow the matters we are covering now to be considered further, if necessary, as part of that Bill. While the Minister nodded vigorously at the time, he did not give that confirmation in his response. The House clearly accepts the need to move fast, and matters which would normally be voted on will not be pushed to a vote. I hope that the Government will reciprocate that flexibility. Speaking for myself, it would be much easier to accept the flaws and gaps in this Bill, if it were clear that there will be the opportunity to give the more detailed scrutiny which these important issues deserve in due course. Will the Minister please provide that confirmation today?

We all welcome the additional clauses that the Government are proposing on trusts, one of the more common methods to obscure ultimate ownership. Of course, trusts can be—and, as the Minister said, they usually are—perfectly legitimate. However, they can be misused. As such, I commend the Government for introducing these new clauses. That said, and in addition to the points made by the noble Lord, Lord Clement-Jones, there is still one area where an important gap remains: the classic way of camouflaging the identity of the ultimate beneficial owner is by the use of discretionary trusts. These will often have a stated beneficiary, such as a charity, but, because they are discretionary, the benefit can be passed to others who are not identified. That might be under a formal agreement, but it is often something less formal or traceable. In such situations, it can be difficult to ascertain who the real beneficiary is. The identity of “the settlor or guarantor” is one clue— government Amendment 15 rightly requires those to be identified.

The Minister kindly wrote to me yesterday afternoon—I apologise for spoiling his weekend. He said that HMRC already has access to information about beneficiaries through new data-sharing gateways and existing exchange of notes mechanisms. However, this is true only for UK resident taxpayers and for situations where money actually flows. It does not cover all jurisdictions, so the gap remains. Many of the ultimate property owners are not UK residents, and value can pass in different ways—for example, the simple right to use the property rent-free would not be picked-up by HMRC.

One other way of trying to see through such discretionary trusts is to identify who has benefited in the past, including those who have had the use of the underlying property at less than market rent. It would be relatively easy to add a subsection to the Government’s Amendment 15 to cover that, and it would not be difficult information for innocent parties to provide. Is this something which the Government could consider, even if it is in later regulation?

As a general theme, we should not be allowing overseas entities to register unless they are fully transparent. To be honest, the Government’s apparent reluctance to accept clauses which would improve that transparency is somewhat concerning. On that theme, I also wholeheartedly support Amendment 17. It seems rather pointless to have information on the overseas entity, if that still fails to show us who owns the property. I urge the Minister to look at that seriously.

[Lord Agnew of Oulton (Con)]

My Lords, I shall speak in support of the noble Lord, Lord Clement-Jones, and his Amendment 17. I recognise that the Government have made big strides in the last few days to listen to the concerns which are so widely held. However, given all this effort, and given that the Bill has sat almost ready for four or five years, I feel that we could go further today and do the job properly.

There is no point in legislating for a Bill that leaves huge gaps for more anonymity. I am really sceptical about the need for endless anonymity. The people who strive to have anonymity do not always have it for the right motives. We need to recognise that. I said to the Minister before we came to the Chamber that we spend our lives being entirely reasonable in this country while trying to deal with very unreasonable people. Of course, we must stick to the law, but we need to have the levers in the law which enable us to tackle these bad actors. This is why, in my own slightly layman attempt with Amendment 23, I have tried to bring more focus on the promoters of these organisations. This is to ensure that there is much more responsibility taken by directors who promote organisations, and that they help to provide proper due diligence when working with the sorts of people they are busily defending anonymity for.

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Moved by

[Lord Agnew of Oulton]

3: Clause 4, page 3, line 21, at end insert—
“(3A) The registrar may request further information to be provided in a timely manner where there appear to be material omissions or suspected false statements.(3B) An application may not be accepted unless the registrar is satisfied that any request for further information has been adequately addressed.”

[Lord Agnew of Oulton (Con)]

I really want to carry on in a similar vein to earlier comments, and what my Amendment 3 is trying to do is to give more levers to government and enforcement agencies to force out information when we are worried that the information is not clear. My noble friend made the point that the Explanatory Notes say that this will be subject to regulations, but those regulations will be subject to a negative resolution. Could my noble friend confirm that we could be involved in the drafting of those regulations, rather than being faced with a fait accompli at the last minute, because I think there is a lot more to be done here? This perhaps plays to my noble friend’s point about the iterative improvements this Bill is going to need over the next few years, because it is fiendishly complicated.

The other piece to this jigsaw is the likelihood of prosecution of bad actors. Having been in business many years, I am afraid that the phrase that has often been offered to me when one is trying to get things done is “It’s the cost of doing business.” If the fines are so weak and the enforcement so inconsistent, it sends a message to those bad actors to continue, because—let us be realistic—is the NCA or Companies House, or any of these other people, going to take an action against a promoter in the British Virgin Islands for £10,000 of unpaid fees? It is just not going to happen, unless we are very clear that there is a mechanism for that to happen and that the fines very quickly get to a level that makes it worth while for litigators, acting on behalf of the taxpayer and the Government, to do that. I beg to move.

[Lord Sikka (Lab)]

My Lords, I rise to speak to a number of amendments in my name in this group—there are eight of them—and I will be fairly brief.

First, Amendments 5 and 13 basically ask the beneficial owners and various other parties to provide their former names. In Part 4 of Schedule 1, the Bill requires managing officers who are managing the beneficial owner’s interest to provide their former names. But the same is somehow not required for registerable beneficial owners where they are persons other than individuals—which could be companies that are forever changing their names, or other parties. What I am seeking to do through Amendments 5 and 13 is to, as it were, align the various provisions in the Bill, and I hope that the Government will be agreeable to that.

Amendments 8, 12 and 14 require the beneficial owners, or their managing agents et cetera, to provide a list of any criminal convictions and sanctions against them. At the moment, the Bill does not ask for that kind of information, so it is perfectly possible for somebody to look at this proposed register of property ownership and not know that the ultimate beneficiaries have various convictions, which may well be abroad. It really exerts pressure on them to either come clean or to avoid the UK altogether—which perhaps would be more preferable. Again, it is a fairly straight forward suggestion asking the Government to act upon that.

The meatier part of my eight amendments relate to Amendments 18, 19 and 20, which take issue with the Government’s provision of the definition of registrable beneficial interest, generally taken to be 25% of the shares or voting rights, or somebody having significant influence or control. As it is now defined it is too wide. Indeed, the provision of any number is too wide. If you say it is 25%, it is not inconceivable that half a dozen people will get together and make sure that nobody gets to 25%. If you specify 20%, that will be exactly the same. So four, five or six drug traffickers can get together and own a fraction of a company, and through that they can invest their proceeds in a property. Under this kind of approach, none of them would be identified as a beneficial owner or count as a person of significant control, because they do not meet the thresholds specified in the Bill.

The Bill as presently drafted leaves open the possibility that companies holding UK property would continue to hide the identity of true owners by claiming that there was no beneficial owner. This is already a major problem at Companies House for the companies already registered in the UK. That has been identified by a number of whistleblowers and a number of leaks that we have had. However, rather than tackling the issue, the Government have imported these problems into the Bill, and it is quite likely that the Bill will not achieve its assumed objectives.

So I suggest that there should be no numerical specification of the beneficial interest definition; rather, any interest should be disclosable. It is not every day that ordinary individuals want to buy UK property through opaque offshore companies. They have a reason why they want to do this, so we must make sure that absolutely no door is open to them. By leaving this definition, the danger is that the Bill simply will not achieve its objectives. I therefore recommend my amendments to the Government in the hope that this will help to end the abuses.

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[Lord Callanan (Con)]

Yes, I am happy to meet with the noble Lord and his colleagues to discuss that matter.

[Lord Agnew of Oulton (Con)]

I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly to make my first contribution in Committee on these two very important amendments. Both were very comprehensively introduced by the noble Baroness, Lady Kramer.

As a former journalist, I reflect on how protecting your sources is something that is drummed into you from a very early stage in your career. However, one thing I have observed over 20-plus years as a journalist is how much more complex this has become. Having been an editor at the Guardian Media Group, I know what difficulties there are in trying to protect sources these days. That is on the technical side of things. But, as the noble Baroness, Lady Kramer, said, there is also the issue of how torrid a time some people have had even when whistleblowing about what you might describe as ordinary and mainstream companies. We have seen that with people who have exposed safety and financial issues. With some of the people we are looking to target here, it is crucial that there is the security of knowing that, if information comes out and others seek to prosecute, uncover and expose them, there will be a group looking after the whistleblower. The noble Baroness has made a very important point.

[Lord Agnew of Oulton (Con)]

I support the amendment of the noble Baroness, Lady Kramer. I accept that it is unlikely to go into this Bill, but I very much hope that it will go into mark 2.

I do not share the somewhat Panglossian view of my noble friend the Minister that this whole crime issue is a tiny issue. There is a wall of bad money out there trying to get in, and we have been far too complacent. The Transparency International report of 2018 looked at the BVI and found over 1,100 companies involved in 200 major frauds to the value of tens of billions of pounds. This was just one territory.

Whistleblowers are a vital source of information and intelligence. The noble Baroness, Lady Kramer, is right in saying that we do not recognise them nearly enough in this country. I will not go on further, save to ask the Minister replying that she will take back this issue and ensure that it is plumbed into the next Bill.

[Lord Cromwell (CB)]

I rise briefly, in part to support this whistleblower amendment. I have asked questions on this in the House before. They are very poorly treated—this is just a fact. I agree with the noble Baroness, Lady Kramer, that we need to do better, but I also agree with her that it probably does not fit into this Bill. The noble Baroness has been a tireless advocate for an office for the whistleblower, and such a facility needs to be brought forward rather than permanently left to wither on the vine, as has been the case.

When I asked a question about whistleblowers before, a Member of the House, who was sitting behind me and is no longer with us, said, “Don’t you mean snitches?”. That is exactly the kind of culture we face. I hope that the Government, broader than this Bill, will look seriously at an office for whistleblowers.

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[Lord Callanan (Con)]

My Lords, it might be helpful for the Committee, before it debates this amendment, if I set out that of course I am aware of the strength of feeling on this issue and am very grateful for the engagement with the noble Lords, Lord Coaker and Lord Fox, and others on it over the weekend and the past few days.

As I indicated earlier, we are keen to progress this vital legislation collaboratively and swiftly, and I again pay tribute to the Opposition for helping us to do that. Therefore, if I tell the House that the Government are prepared to accept Amendment 43 tabled by the noble Lords, Lord Fox and Lord Coaker, should they wish to re-table it on Report, perhaps that would enable a more speedy consideration of this group.

[Lord Agnew of Oulton (Con)]

My Lords, in view of that, I will not press my Amendment 44.

[Lord Coaker (Lab)]

It would be appropriate to thank the Minister for agreeing to accept the amendment in my name and that of the noble Lord, Lord Fox, so I put that on the record, and we will come back to it on Report.

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[Lord Thomas of Gresford (LD)]

It is a real pleasure to follow the noble Lord, Lord Cromwell. I spoke at length on this matter last Wednesday and I do not propose to speak on it again. Three things have happened since then. The Lord Chancellor has called for evidence, as the noble Lord pointed out. My Private Member’s Bill, which I referred to, seems to have reached its final form, and I hope it will be progressed quickly. I very much hope that this problem is properly dealt with in a very short time, and I await the Minister’s response.

[Lord Agnew of Oulton (Con)]

My Lords, I shall speak in support of my amendment, which seeks to achieve two things: an annual review of the funding adequacy of our crime-fighting agencies in this area, and a report within three months of the Bill, and annually thereafter, to set out how well we are managing this whole area.

I know we will hear warm words from the Minister about various sums of money—£400 million and so on—but the brutal reality is that this whole thing has been abysmally funded; that is the only way we can describe it. The noble Lord, Lord Cromwell, is right that the NCA’s own funding has fallen by some 4% in real terms at a time when international crime has been soaring.