Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025

Debate between Lord Fox and Lord Vaux of Harrowden

Monday 3rd February 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I welcome the noble Baroness to her post, as it is the first time I have been across the table from her. She was not here when we were debating the two economic crime Bills, but I am sure she is aware that the subject of the use of trusts to obscure the beneficial ownership of UK property on the ROE and obscure ownership of UK companies, which this instrument does not cover, was one of the major areas of our debates at the time.

These regulations are a small step to improve transparency around the use of trusts to own UK property. I understand the balance around the protection of minors and others at risk, so I welcome the regulations, but slightly question how much difference they will make in practice. At least the progress is in the right direction.

I will ask a couple of questions about some general, related areas, if I may. I could not resist this opportunity. First, the latest information that I could find indicates that the true identity of the beneficial owner of UK properties owned by overseas entities—there are 152,000-odd—is not published in about 70% of cases, at the moment. For about 35% of cases, the true beneficial ownership is not known even to law enforcement agencies. There may be a number of reasons for that, including simple non-compliance, which accounts for about 10% in the last numbers I saw; the use of opaque corporate structures, which claim no beneficial ownership, or the use of nominees; and the use of trusts, which is the biggest one, particularly in our overseas territories. Transparency International’s latest numbers identify about £6 billion worth of suspicious transactions in UK property coming through our overseas territories, using trusts.

Could the noble Baroness provide up-to-date statistics on both level of compliance with the rules and the number of properties where the ultimate beneficial ownership remains unknown, for whatever reason? I am happy for her to write, if necessary, if she does not have the numbers to hand. Is she happy with the level of identification of beneficial ownership as it stands? What impact does she think these regulations will have on that? What further steps are planned to make sure that we know who beneficially owns the properties? In particular, what plans does she have to make the information from our overseas territories more transparent? The British Virgin Islands, in particular, appear to be the jurisdiction of choice for obscuring beneficial ownership, at the moment.

Of those entities that have not complied—10% was the number that I saw, which is about 15,000 entities—how many have been fined? Of those, how many have paid those fines and gone on to comply subsequent to payment? How many charges have been taken against the properties in relation to non-payment of the fines? In other words, does Companies House have sufficient powers to deal with non-compliance, and is it using those powers effectively?

Secondly—and I hope that the noble Baroness will forgive me for going slightly off-piste—another way to hide beneficial ownership is through the use of nominee shareholders. I notice the noble Lord, Lord Fox, smiling; I hate to be predictable, but there we go. This is particularly true for UK companies, where the persons with significant control or PSC rules can be sidestepped by the use of nominees. An entire industry has built up around that. The previous Government accepted that there was an issue around the use of nominees for this purpose and agreed to include a power in the Economic Crime and Corporate Transparency Act 2023 to take further action against the use of nominee shareholders and the industry that supports them, if they felt it was necessary. This is now Section 790IA of the Companies Act 2006. I want to take this opportunity to ask what assessment this Government have made of the use of nominees in that respect and whether they intend to make use of the powers they have under the Companies Act to address it.

[Lord Fox (LD)]

When the discussions were had with the noble Baroness about her becoming a Peer, I wonder whether they mentioned that she would be in the Moses Room presenting statutory instruments. I bet they did not. But I welcome her, and thank her for the clear explanation as well as the Explanatory Notes, which worked very well. To some extent, the Minister is at a disadvantage—or perhaps it is an advantage—in that the three speakers in this debate are the old gang getting together. We were all involved very extensively in both this and the predecessor Bill that came though.

--- Later in debate ---

[Lord Fox (LD)]

I am sorry to labour the point, but the way in which it is being depicted is as if people will accept the registrar’s ruling and say, “Oh, yeah, right, I understand why you’re not letting me do this”, or, “I understand why you’re letting this person look at my identity”. It seems to me that human nature will operate in exactly the opposite direction and that there will quickly be a huge backlog of people who do not agree with the registrar’s decision, one way or the other. There does not seem to be a defined appeal process. If it is all getting lumped into judicial review, we all know how long that takes and what it leads to—and if there is no system and it all ends at the registrar, there is huge pressure on the registrar to be right every time, which will be extraordinarily difficult. While I can understand how it is being described, my sense is that it will be a lot messier than that.

[Lord Vaux of Harrowden (CB)]

Just to add to that, I cannot see anywhere in the regulation where the registrar has to inform the subject of the application that an application is being made. I can see that they can, but I do not see that they have to.

Economic Crime and Corporate Transparency Bill

Debate between Lord Fox and Lord Vaux of Harrowden

3rd reading
Tuesday 4th July 2023 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I thank the Minister for these amendments. As he said, I described at Report the loophole in the register of overseas entities that allows people to hide the true ownership of UK properties through nominee arrangements. As the Minister described, he tabled Amendment 9, as he undertook to do, which effectively closes that loophole. I am not sure what conclusion to take from the fact that my original 11-line amendment has turned into one that runs to three pages—it presumably says something about my amendment drafting skills—but I am most grateful.

The other amendments that the Minister tabled relate to the register of persons with significant control. These new amendments tighten the rules and will improve the ability to identify PSCs. In particular, I welcome the requirement for the information to be filed on a centrally held register, rather than locally held registers managed by the companies themselves. The requirement to explain why a company is exempt from the PSC requirements is also an important improvement.

I was slightly confused as to what happens if a company has become aware that it has a PSC but the PSC has not yet confirmed their status or information. Amendment 20 appears to deal with that situation; it requires the company to notify the registrar if it knows, or has cause to believe, that a person has become a registrable person but has not yet had confirmation. However, that seems to conflict with the explanatory statement to Amendment 17:

“This means that a company will only need to notify the registrar of a person with significant control if the person has confirmed their status and information about them”.


Amendment 20 says that the registrar must be notified of an unconfirmed PSC but Amendment 17, or at least the explanatory statement to it, seems to say exactly the opposite. Can the Minister please explain which is right and how the two work together? More importantly, can he reassure me that a PSC will not be able to avoid being notified to the registrar simply by failing to confirm their status or information.

I put on record that, while I welcome and support the amendments, I do not believe that they deal with the problem of nominee shareholders not having to declare themselves as such. The new amendments are not an alternative to the amendment that the House passed on Report that required shareholders to state whether or not they are acting as a nominee, and if so who for. I hope that the Government will continue to consider that amendment and look at it favourably in the other place, or at the very least meet with me and others to see whether we can find a workable compromise. It should not be possible for bad actors to hide behind nominees, and there should be consequences for those who act as nominees to conceal such bad actors.

I am extremely grateful to the Minister and his officials for their helpful and constructive engagement throughout this process; they have been extremely generous with their time. In particular, I thank them for having addressed a number of issues, including the one we have just talked about, throughout the progress of the Bill. The level of engagement from all Ministers involved has been exemplary—if only all Bills were managed so constructively. I also thank all noble Lords who have been so generous in their support of the various amendments that I have proposed. When the Bill started in this House, it was generally seen to be a good Bill, and I think that it emerges from this House in even better shape.

[Lord Fox (LD)]

My Lords, there are times when your Lordships’ House is confronted with so many Third Reading amendments that it can be somewhat irksome, but this is not one of those occasions. This is a useful and helpful response from the Minister and his team to the debate we had on Report, and for that I thank them.

I reinforce the point made by the noble Lord, Lord Vaux, that these amendments do not replace those that we passed on Report, which I similarly hope the Minister and his team will continue to consider as we go forward.

Transparency of ownership and the registration of overseas entities are important to this. The point we have made on a number of occasions about keeping the whole Bill under review and looking at how it works once it becomes an Act will be vital. It is clear that we cannot second-guess all the reactions we will get out there, so having the fluidity and agility to deal with that will be important.

Although it is slightly confusing, I will offer my thanks and congratulations at this point, so that I do not do so twice. First, I congratulate the Ministers on getting legislative consent so smoothly. For many of the Bills that I have been working on of late, legislative consent never seems to come. However, unlike many of those Bills, this is one where all the House agreed on its objectives, so all we were discussing were the ways in which we could achieve those objectives. In that regard, I thank the Ministers for the great amount of time and effort they have devoted to listening to, and having meetings with, Members across your Lordships’ House and for seeking ways of accommodating our helpful suggestions. Particular thanks are due to the noble Lords, Lord Johnson and Lord Sharpe, and the noble and learned Lord, Lord Bellamy, as well as the noble Lord, Lord Goldsmith, and the noble Earl, Lord Minto, who made appearances in Grand Committee.

Similarly, the whole Bill team, and organisations such as Companies House, have given up a lot of their time to speak with us, so thanks should be given to them. There have been many contributions from the Cross Benches and the Benches opposite. I will not single out anyone for praise, except to say that it has been a great pleasure working with everyone on the Bill; I felt that we were all pulling in the same direction.

I also thank the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Blake, for their camaraderie on the Bill. I thank my noble friends Lady Bowles, Lady Kramer, Lord Clement-Jones, Lord Wallace of Saltaire, Lord Thomas of Gresford and Lord Oates on our Benches. Finally, thanks go to Sarah Pughe in our Whips Office, who has kept us all in order.

Economic Crime and Corporate Transparency Bill

Debate between Lord Fox and Lord Vaux of Harrowden

Committee stage
Tuesday 25th April 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I will briefly support this amendment. As I said on a previous group, I was surprised to discover that the vast majority of small accountancy firms are not regulated by the Institute of Chartered Accountants in England and Wales, of which I am a member—fortunately, I am not also a member of the Chartered Institute of Taxation.

That majority of small firms are the ones doing the verification under the overseas entity register and will be the authorised corporate service providers. They are, or will be, regulated by HMRC for anti-money laundering purposes, and that is the qualification they need to be able to do the verification. If HMRC is not carrying out this role seriously—which it is not—then all the safeguards built into this Bill on verification become meaningless. It is incredibly important that HMRC’s resolve in terms of its responsibilities as an AML regulator is sufficiently stiffened to mean something for all these ACSPs and the due diligence verifiers in the overseas entity register. Without that, this Bill loses an awful lot of teeth.

[Lord Fox (LD)]

My Lords, it is true that the Minister is being asked to take on Treasury functions—having first talked about cryptocurrency, we are now dealing with this issue—and I look forward to his response. I, too, support the noble Lord, Lord Agnew, who has been consistent in his theme that, without due, proper and improved enforcement, the Bill that we are spending all these hours debating will have very little effect on the outside world. This is one element of the enforcement story.

The noble Lord’s point is bang on: where there is a finite resource—which, of course, there always is—HMRC will target what it believes benefits the country most. As the noble Lord pointed out, that tends to be tax generation rather than AML functions. For this Bill to be successful, something needs to change to refocus the Treasury on AML issues, as we have heard. If that is not to be the noble Lord’s amendment, what will it be?

Economic Crime and Corporate Transparency Bill

Debate between Lord Fox and Lord Vaux of Harrowden

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

In our debate on the previous group, I asked the Minister what regulation the Government were intending on ID verification. The Bill allows the Secretary of State to create regulations on what the ID verification process will be. The Minister did not answer that question then, so this seems like a convenient moment for him to do so.

[Lord Fox (LD)]

The noble Lord just said exactly what I was going to say. If it is not this, what is the process to identify people and what documentation is required? It will be interesting to hear the Minister’s response to the challenge from the noble Lord, Lord Ponsonby: if it is good enough for voters in local elections, why is it not good enough for multi-million-pound companies?