Economic Crime (Transparency and Enforcement) Bill

Debate between Lord Agnew of Oulton and Lord Sikka

Committee stage
Monday 14th March 2022 Lords Chamber

[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.

Money Laundering

Debate between Lord Agnew of Oulton and Lord Sikka

Wednesday 24th November 2021 Lords Chamber

[Lord Sikka]

To ask Her Majesty’s Government what assessment they have made of (1) the levels of compliance with money laundering regulations by banks in the United Kingdom, and (2) the steps being taken by the Financial Conduct Authority to prevent money laundering.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, the Financial Conduct Authority is the designated anti-money laundering supervisor for banks in the UK. The FCA uses data-led supervision programmes to assess its target firms. It issues guidance so that supervised entities understand the AML risks they are exposed to. The Treasury’s 2019-20 supervision report found that 86% of the 177 financial institutions subject to FCA active supervision were compliant. In instances of non-compliance, the FCA takes robust action to deter future breaches of the regulations.

[Lord Sikka (Lab)]

My Lords, the FCA has secured only one criminal conviction of a bank for money laundering, which was actually volunteered. Numerous leaks, such as the Pandora papers and the Paradise papers, show that UK banks are involved in illicit financial flows, yet the FCA is missing in action. What prevents the Minister commissioning an independent inquiry into the involvement of banks in illicit financial flows?

[Lord Agnew of Oulton (Con)]

My Lords, the noble Lord tells only part of the story. A number of major fines have been imposed on financial institutions in the last few years: Deutsche Bank, £160 million in 2017; Standard Chartered, over £102 million in 2019; Commerce Bank, £37 million in 2020; and Goldman Sachs, £48 million in 2020. We have rigorous oversight and we continue to review it the whole time.

Global Minimum Corporate Tax Rate

Debate between Lord Agnew of Oulton and Lord Sikka

Wednesday 14th April 2021 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, the Treasury is assessing the statements recently made by the US Government on that tax rate, so we are not in a position to opine on those yet. We agree on the patchwork point: we introduced the digital services tax as an interim to plug at least some of the gaps and problems that exist, but we will certainly review that if we can reach an international consensus.

[Lord Sikka (Lab) [V]]

My Lords, I draw attention to my entry in the Members’ register. A strong, global, minimum tax on multinationals would recover much-needed billions for this country and others. Does the Minister agree it is essential for such a tax to provide a fair balance of taxing rights to all countries, based on allocation factors reflecting the real activities in each country, with a high minimum such as the 21% proposed by the US Administration?

[Lord Agnew of Oulton (Con)]

As I answered to an earlier question, we are not yet in a position to announce whether we support that specific rate. Our policy has always been to put the emphasis on pillar one, which is the allocation of profits in the countries in which they are generated. To go back to my earlier point, if a company is going to use the infrastructure of a country in terms of its affluent, well-educated population, and take profits from it, it must contribute to it, too.

Economic Update

Debate between Lord Agnew of Oulton and Lord Sikka

Tuesday 12th January 2021 Lords Chamber

[Lord Agnew of Oulton (Con) [V]]

I am not entirely sure what the noble Lord is referring to—perhaps to supply chain issues in the first few days of Brexit. If that is his question, I can assure him that all is being done to iron out these initial problems. Overall, the system has worked remarkably well when one considers the enormous change in operating procedures that businesses have had to bring about on an essentially cliff-edge basis.

[Lord Sikka (Lab) [V]]

My Lords, the Government have imposed pay freezes on public sector workers, and many others have received little or no financial support and are struggling to survive. However, they face the full and escalating costs of gas, electricity, water, broadband and even the funerals of their loved ones. What consideration have the Government given to freezing prices of these services to enable hard-pressed families to make ends meet?

[Lord Agnew of Oulton (Con) [V]]

I am not aware of a huge jump in inflation, as suggested by the noble Lord. Indeed, inflation remains extremely low. The pay freeze in the public sector was carefully targeted to ensure that those on the lowest earnings still received some protection.

Future of Financial Services

Debate between Lord Agnew of Oulton and Lord Sikka

Wednesday 11th November 2020 Lords Chamber

[Lord Agnew of Oulton (Con)]

I thank the noble Baroness for her question. In relation to the equivalence announcement, we are taking on board 17 equivalence rules. In the interests of brevity, I shall not go through all of them, but I shall ask that they are entered into Hansard. The point the noble Baroness makes about the early or perfunctory removal of equivalence is something we have taken on board. Indeed, other countries have expressed this as one of the EU’s problems, and it will be our intention to have a more transparent process that gives those countries the ability to respond to issues and have a more iterative dialogue.

In relation to the noble Baroness’s points on pension fund assets allocation, I touched on this yesterday in the Statement in relation to local government pension funds, and it is certainly a priority for us to try and steer some of these assets, on a low-risk basis, into infrastructure development.

[Lord Sikka (Lab) [V]]

My Lords, the finance industry has been engaged in bribery, corruption, money laundering, tax avoidance and mis-selling of numerous products. The victims of RBS and HBOS frauds are still awaiting compensation. In July this year, the Intelligence and Security Committee said some aspects of the finance industry were also a threat to national security. I ask the Minister and urge the Government to appoint an independent inquiry into the finance industry, as that would be a good way of promoting public confidence in the industry.

[Lord Agnew of Oulton (Con)]

I do not accept the noble Lord’s harsh criticisms of the sector. As in any sector, one gets miscreants, but is important to remind the noble Lord that this industry employs over 1 million people in this country and contributes £130 billion to our national economy and some £75 billion in tax receipts.