Economic Crime and Corporate Transparency Bill

Lord Faulks Excerpts

Committee stage
Thursday 20th April 2023 Grand Committee

At the moment, only the name of the trustee is published on the register of overseas entities, restricting public access to who owns and controls the trusts and properties. That initial calculation hides the ownership of about 7,000 entities, which is about a quarter of those on the register—which we think is about 20,000 properties. We know that bad actors are hiding behind that. I have been given an example of a Russian individual called Mr Fedotov, who is probably known to many—I will not go into his particular dealings. Land Registry documents show that JTC (Suisse) SA has Aragon Hall as a corporate trustee of the Aragon Trust. JTC (Suisse) SA is a registered overseas entity and lists its beneficial ownership on the register of overseas entities as JTC plc, the firm’s Jersey company. We can see this entanglement of interests. All I am asking in this amendment is that that becomes visible so that when people do that sort of thing there is some accountability.

[Lord Faulks (Non-Afl)]

My Lords, I support the amendment. I have benefited, as I dare say have a number of other noble Lords, from the briefing from Transparency International explaining why the amendment is so important and very much consistent with the theme and title of the Bill.

I too will probe a little what the Minister said about the register of overseas entities. I think he said there were 27,000 on it at the last count—I am sure the figure changes regularly—and that is encouraging. The move for a register of overseas entities was, I fear, prompted mostly by the fact that on large wastes of central London and other parts of the United Kingdom were properties whose ownership was very unclear. In reality, they were often owned by what we now seem to be calling “bad actors”—at least, we did not know who they were, whether they were bad or good actors. That information should now be much more available than it was.

I think the Committee would be most interested to know whether, with the information that is now obtained, there has been any follow-up. In the evidence we were given about the register of overseas entities, it was explained, for example, that it should enable some link-up with pursuing people under the unexplained wealth order provisions, because there would be more information—you could identify who owned a property and why, if they were a fairly low-grade official in a Russian company, for example, they now owned a property in Belgravia worth several million pounds. Similarly, how is the information assisting in sanctions and the like, and with anti-money laundering?

Generally, there is a lot of information that should be available to the various agencies as a result of the register, rather than simply ticking a box. There may be a theme in the debate that we have been having. Yes, we are enthusiastic about the increased information that is in Companies House and the increased information that will flow from the identity of those on the register, but what we really want to know is whether it will be translated into valuable information that will fulfil the aim behind this legislation.

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I appreciate that intervention. As I said, I would be happy to write with specific information as I do not have details on all 28,000 registered businesses.

The point I want to make, which is important, is that a very large number of overseas entities have registered and, we assume, sent in information that can be confirmed and will lead to them being compliant. That is quite a high number; it allows us to focus. That is the point. The question was about what happens to the 1,500 to 2,000 or so companies that have not registered. Well, they cannot transact; they cannot participate in transactions in this country. Their assets are untransactable, which, in my view, negates the value of those assets to a significant degree. In effect, they are compelled to register and comply if they want to get their money out; that is important. Clearly, the next phase is to do the work on the companies that have registered to ensure that the information we have is accurate. We then have to make sure of why those companies that have not registered have not done so. Sometimes, there are perfectly legitimate reasons why that would be the case but, on the whole, we have made significant process.

Following our discussion earlier in Committee and the sensible points from the noble Lord, Lord Wallace—I have been glad to discuss them with my colleagues—let me say that compliance and law enforcement are at the crux of this issue. There is no point in bringing in any of this legislation—not even a single line of it—if it will not be enforced and overseen properly. My view has often been that sometimes we may not need new legislation but we need to enforce properly the legislation that we have, where a great deal of our effort will be far more effective.

[Lord Faulks (Non-Afl)]

I am grateful to the Minister for his clarification about the level of compliance. If will press him on one point. Last week we were provided with a useful series of notes that made this point, among others:

“Public registers allow multiple eyes to interrogate data, including the absence of data, to inform a risk-based approach to investigation and enforcement”.


I think that what the Committee would like to know is this: now that there is this compliance, who are those “multiple eyes” and what are they doing with the information that was thought necessary to eradicate some of the kleptocracy that has clearly been identified?

[Lord Johnson of Lainston (Con)]

I greatly appreciate the noble Lord, Lord Faulks, flagging so well the sentence that I was about to deliver. I would like to investigate further, personally as a Minister and for the benefit of this Committee, a more detailed assessment of the crime-fighting efforts that we will employ around this.

I have some good information to impart to the Committee, which to some extent answers the questions. I have particularly looked into the comments by the noble Lord, Lord Wallace, about the UAE and so on. We have signed an anti-corruption pledge or framework with the UAE in the last few years. We have in the Foreign, Commonwealth and Development Office—

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Wallace of Saltaire, and to speak chiefly to Amendment 108, to which I attached my name. I entirely agree with everything he said, and indeed with the introduction to the group. I will just add a couple of points.

My first point is about the cost. A few years ago, Transparency International calculated that the economic damage resulting from corporate secrecy in the UK’s overseas territories alone significantly exceeded the UK aid budget. These are crimes that have real victims and real costs. We must not forget that. The fact is that one hand is operating one way and the other another way, unless we take some action.

The Atlantic Council is not necessarily an organisation with which I am always 100% in agreement, but it produced an article in January entitled “Authoritarian kleptocrats are thriving on the West’s failures. Can they be stopped?” It recommended that the UK should

“address the close connections between the City of London and British Overseas Territories and Crown Dependencies”.

A further recommendation was that the UK should:

“Reduce regulatory mismatches between the primary UK jurisdictions and the Crown Dependencies.”


There is a real hole here. We can drive a cart and horses through the gaps between what is happening here and what is happening in the Crown dependencies and overseas territories. To extend the metaphor a little, for which I apologise, we might be slamming the stable door, but we are leaving the barn door open unless we address this issue.

In thinking about how these two amendments are connected, and to join them up, let us be really charitable about the capacities of these overseas territories and Crown dependencies. The population of the 14 overseas territories is 270,000 people; that of the Crown dependencies is rather less. Let us be charitable when we think of the size of their Administrations and their capacities, and think about the extreme inequality of arms between the kleptocrats and their enablers and those organisations. Even if those territories and dependencies want to do something, with the best will in the world, how can they conceivably have the capacity to do it? We have a responsibility, given the UK Government’s role, for this economic crime Bill to include this coverage. This is protection, support and assistance, as well as something that protects the whole world.

[Lord Faulks (Non-Afl)]

My Lords, I have great sympathy for these amendments. I congratulate the noble Lord, Lord Wallace, on his tenacity on this issue, which I have noticed on a number of different Bills. He is quite right that this issue tends to come up at the fag end of debates, so it can be overlooked. It is very important.

I have one point to make about this. There is, of course, a distinction between the Crown dependencies and the overseas territories. I speak as a former Minister with responsibility for the Crown dependencies. Their position is such that, before legislation that includes them is brought forward—certainly before it is passed—there is a well-established convention whereby the Government consult the Crown dependencies before including them in legislation, certainly by way of an amendment. I ask the Minister whether any such consultations have taken place. If not, why not? This is clearly important, and it is a long-standing issue that the Crown dependencies will no doubt have strong views about, but we need to know them before legislating.

My second point is slightly different—the Minister is quite understandably looking elsewhere at this point. I was rather disappointed by his response on the question of trusts that we would not have a debate on them now. I gently remind him that the Joint Committee on the Draft Registration of Overseas Entities Bill, which I had the privilege of chairing, reported in 2019. It emphasised the importance of trusts as a potential vehicle for fraud. The committee’s report set that out between paragraphs 76 and 79 and said that the matter needed looking at as a matter of urgency. The committee was given assurances that it would be; it was not. It took the invasion of Ukraine before the register came in. Here we have the second and final chance to look at economic crime, which would include the use of trusts as a vehicle for fraud. In those circumstances, it is very disappointing to hear from the Minister that we will not have a debate on that now.

--- Later in debate ---

[Lord Garnier (Con)]

The noble Lord saw my noble friend Lord Faulks nodding. The fact that we went to the same school, the same college at Oxford and the same Inn of Court has absolutely no bearing on this, save to say that he will answer that question in a moment. I am sure he would wish to catch the Committee’s eye. That having been said, I want to finish on this rather wishy-washy point. I sympathise with what has been said in support of these amendments, but we need to take a step back and have a reality check to see how this would be received by the people against whom it will bite.

[Lord Faulks (Non-Afl)]

I will, then, as I usually accept that invitation. As I understand the position, an Order in Council is the mechanism. The convention and the arrangement with the Crown dependencies that I spoke of is not the same with the overseas territories, although the points made about consulting them very much apply.

[Lord Wallace of Saltaire (LD)]

If I may respond to the noble and learned Lord, Lord Garnier, since I have been involved in discussion on this on a number of previous Bills, we are normally assured by the Government as a Bill goes past that there are ongoing consultations with the CDs and the OTs, and that they have been assured that the key proposals will be incorporated into their domestic law within a limited period. As I said, there have been a number of occasions when that has not happened in some territories. It has often been the weakest territories concerned and, after all, this Government have spent a good deal of money on taking over the government of the Turks and Caicos—having to intervene where things have failed. This is rather like saying, “On most occasions, we do not expect most banks or overseas territories to be involved in any form of corruption, but sometimes some will be tempted”. Some may be overcome and that is what we are trying to guard against.

--- Later in debate ---

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I will very briefly support the proposals. It makes sense to ensure that people who think that they are buying something legitimately are adequately informed. I like the series of amendments from the noble Lord, Lord Vaux, to solve the problem that was pointed out on a previous day.

The fact is that those of us involved with companies and so on regularly have to update the Companies House register very quickly indeed. Fortunately, because of modern technology, that is relatively easy to do. Similarly, we have to update our register of interests on a regular basis, so I see no reason why this should not apply in this important, specific case.

[Lord Faulks (Non-Afl)]

My Lords, the Joint Committee was certainly very concerned with the need to update when it provided its report in respect of the register of overseas entities. It particularly acknowledged that an event-driven update requirement was a much better way of securing the accuracy of the register. I entirely endorse what the noble Lord said.

--- Later in debate ---

[Lord Faulks (Non-Afl)]

To add further to the intellectual challenge, and in support of what the noble Lord, Lord Agnew, said, when you transfer land quite a lot of formalities have to be gone through, in terms of conveyancing and the like. We are just talking about another formality that needs to be complied with. I do not understand that to be particularly onerous and it is consistent with what is expected. An event-driven matter was what we raised in our report; I am not sure that it should come as a great surprise that we think this is a sensible idea.

[Lord Johnson of Lainston (Con)]

As I hope I have illustrated, my enthusiasm for intellectualisation is paramount, even after an enjoyable light afternoon of committee debate. If I may expand further on the difference with the legislation relating to overseas entities and other types of purchase, using my noble friend Lord Agnew’s concept about the bus route or discovering moments before one buys a house that they are going to build past it some terrible thing—I was going to say a high-speed rail line, but of course we are enthusiastic here about building high-speed rail lines in this country—that is not the same thing at all.

Here, we are talking about the concept of overseas entities and the whole principle around this is to ensure that non-compliant entities are unable to transact. That is the only way to make this process workable. It is not a question of caveat emptor or something that can be corrected later, or whatever. This will prevent a transaction from happening. If a noble Lord purchases something—we were hearing earlier about the noble Lord, Lord Wallace, going to Battersea Power Station to purchase himself a downsized retirement villa, which seemed to be an upgrading, certainly for the Johnson household—is it reasonable to have a situation in which you cannot be sure whether the party you are dealing with is compliant?

I can see the noble Lord, Lord Vaux, waiting to leap up from his seat to tell me how it is possible. If it is possible to find a solution to this principle, I would be happy to have a discussion, but I am extremely reluctant to make a decision at the Dispatch Box.