Economic Crime and Corporate Transparency Bill

Debate between Lord Johnson of Lainston and Lord Wallace of Saltaire

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Wallace of Saltaire (LD)]

Does the Minister think that there is a case for there being some form of regulation of ACSPs, or does he think that that is not needed?

[Lord Johnson of Lainston (Con)]

I am very grateful for the noble Lord’s intervention, as with all interventions today. The ACSPs are already supervised by the money laundering supervisory authority. Should there be a discussion over some type of more effective oversight of ACSPs, in the view of this Committee? We will no doubt discuss that in the future. But as it stands, they are regulated and if any noble Lord is involved with such a business—if they have a financial services business or have been involved in financial services—they will know the strength of the regulator and the fear in which decent, law-abiding firms hold their regulator when it comes to enacting the necessary practices to perform their duties and tasks.

The final amendment that I have in my notes is Amendment 52, tabled by the noble Lords, Lord Coaker and Lord Ponsonby, and the noble Baroness, Lady Blake. It would require a report on foreign ACSPs to be made one year after this Act is passed. I do not consider this amendment to be necessary, the main reason being that colleagues in the other place have already agreed to the addition of Clause 187, requiring the Secretary of State to prepare reports on the implementation and operation of Parts 1 to 3 of the Bill and to lay a copy of them before Parliament within six months of the Act being passed and every 12 months thereafter. Since authorised corporate service providers are provided for in Part 1, they should already be captured.

For the reasons given, therefore, I do not support these amendments. I ask the noble Lord, Lord Vaux, to withdraw Amendment 48.

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord, Lord Browne, for suggesting the creation of another authority but, in this instance, I would be reluctant to do that. As I said, I have noted his comments very carefully, and I will be happy to have further discussions with noble Lords around this issue. I am sure it will be a matter of debate, but the important point is that I do not believe that we should be setting minimum costs by legislation. It would be completely impractical and would remove the flexibility and purpose.

I now come to the economic crime fund and economic crime enforcement agencies Amendments 69 and 71 tabled by the noble Lord, Lord Agnew, and the economic crime fund Amendment 106E tabled by my noble friend Lady Altmann, which are very relevant. As we have discussed—and I take this view personally—we can have as many rules and regulations as we want, but if they are not enforced properly, they will have no value. That is why when noble Lords come to me with new ideas—there is an ever-bubbling font of new ideas—for new regulations, strictures and penalties that could be imposed upon businesses to reduce economic crime, I sometimes push back. I say that it is not necessarily about introducing new regulations and rules but about making sure we have the resources, focus and capabilities successfully to prosecute existing crimes.

That is at the core of my next comment: the Government are committed to ensuring that law enforcement agencies have the funding they need. The combination of the 2021 spending review settlement and private sector contributions through the new economic crime levy will provide funding of £400 million over the spending review period. The levy applies to the AML-regulated sector and will fund new or uplifted activity to tackle money laundering, starting from 2023-24. I believe that the levy is expected, or targeted, to raise £100 million. I am not sure whether that figure is confirmed; I will come back to noble Lords if it is wildly inaccurate.

In addition to this, a proportion of assets recovered under the Proceeds of Crime Act 2002 are already reinvested in economic crime capability. Under the asset recovery incentivisation scheme mentioned already by the noble and learned Lord, Lord Garnier, and some other noble Lords, receipts that are paid into the Home Office are split 50:50 between central government and operational partners, based on their relative contribution to delivering receipts.

Proceeds from fines issued by Companies House are placed into the Consolidated Fund, which is used for financing the expenditure of government departments on important public services. The proposed amendments would see the incorporation fees, all fees paid under regulations made under Section 1063 of the Companies Act and all penalties paid under regulations made under Section 1132A of that Act being surrendered into an economic crime fund. This would be contrary to the fundamental principle that the fees are paid for the benefit of incorporated status and would fall foul of long-established Treasury rules preventing fees being used to fund activities that may be completely unconnected. I am happy to be corrected, but I do not believe that this is pushing back against the concept of hypothecation. The point is simply that these are fees to be paid for a service, and it would not be appropriate for them to be directed to another function.

This would also encompass almost the entirety of Companies House’s income, leaving it with no resources, and it would require funding from elsewhere, primarily from the taxpayer, so going completely against what many noble Lords, this Government and I want, which is to use the fees to pay for the functioning of Companies House. The fees would then go into a fund, so we would have to pay for Companies House on top of that. I am sure that is quite clear. The Government do not believe it is appropriate to place the burden of funding Companies House on the taxpayer, and this would be contrary to the fundamental principle that the fees are paid for the benefit of incorporated status.

I would like to attend now to some comments made by the noble Lord, Lord Browne.

[Lord Wallace of Saltaire (LD)]

My Lords, I do not know whether the Minister is familiar with the Home Office practice on this. The Home Office has a very clear practice of full-cost charging for visas for entry to this country. I think it now costs £2,000 to £3,000, for example, for the spouse of a British citizen returning to this country to get settled status in Britain. If some parts of government are now insisting on full recovery of costs, perhaps this is a model that could be applied here as well.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord; that is exactly what I am saying. The whole point about the fees is that they are charged in order to pay for Companies House; that is precisely the same principle. Unless I have misunderstood the intervention, this goes directly against the amendment that introduces a fund that has to be paid for by the fees levied on people who are setting up companies or annually registering.

I want to attend to a point made by the noble Lord, Lord Browne. He said—rightly—that the whole point of this legislation is not to profit or make money from it but to stop the bad practice happening in the first place. The fines and penalties to be issued by Companies House are designed to drive a change in behaviour, not be a revenue-raising tool. I was grateful to my noble and learned friend Lord Garnier for raising the point around how these fines could or should be used. It is possible to suggest that the same situation happens with speed cameras. The theory there is that we want to reduce speed on the roads, not raise revenue—at least, that is my personal opinion.

Economic Crime and Corporate Transparency Bill

Debate between Lord Johnson of Lainston and Lord Wallace of Saltaire

Committee stage
Monday 27th March 2023 Grand Committee

[Lord Agnew of Oulton (Con)]

My Lords, I shall speak to my amendment on designated persons. The Minister is already dealing with this issue in some of his own amendments, but I stress that mine would be a slight tweak to the system that would have enormous power over the very few people who would be impacted. Last year only 1,200 people were designated for the Russian activities—across the whole world, not just by us—so we are talking about low numbers of thousands of people relative to the 5 million on the register. We also know that some of these bad actors got wind of their designation before it happened and were able to reorganise their financial affairs, so the horse had well and truly bolted by the time we rumbled into action. This slight amendment would give much more transparency into what these people were doing and allow the enforcement agencies to act accordingly.

[Lord Wallace of Saltaire (LD)]

My Lords, I note that these various amendments cover England and Wales, Scotland and Northern Ireland, but the UK financial system very much includes Jersey and Guernsey for a great many company formations and associated company forms. I wonder whether at this stage the Minister could explain whether or not the disqualification of persons from being directors within the UK will in time apply to the Crown dependencies, or whether one will still be able to act as a director for companies formed in the Crowd dependencies while disqualified within the UK.

[Lord Johnson of Lainston (Con)]

I appreciate the noble Lord’s comment about the Crown dependencies. I am happy to confirm that this debate develops the specific answer to his question. My assumption would be that they fall under the register of overseas entities and the requirements placed around them, but I will confirm that. The noble Lord makes a very valid point. It would be peculiar if we did not include the Crown dependencies of Jersey and Guernsey in our legislation. My assumption is that they are well covered, and I hope that is the case.

I thank my noble friend Lord Agnew of Oulton for his Amendment 24. I assure him that I do not think it is necessary to achieve his intentions. Provisions in the Bill already allow Companies House proactively to share data more widely for purposes connected with its functions. Data sharing will also be permitted to assist public authorities with exercising their own functions. This will include government bodies such as OFSI, which is part of His Majesty’s Treasury, the National Crime Agency and so on. Examples of data sharing could be for the purpose of confirming the accuracy of data provided to the registrar to ensure the register is kept up to date or for passing on intelligence to law enforcement agencies to minimise criminal activity.

Companies House will operate a risk-based approach targeting its efforts primarily in those areas where information and intelligence gleaned through new data-sharing powers and through Companies House’s own systems and processes suggest that particular scrutiny is warranted. The Government believe that this amendment, while well intentioned, is overly prescriptive and would lead to Companies House having to share potentially irrelevant and unnecessary information with OFSI and NCA. This would be an inefficient use of government resources and could lead to more serious intelligence that needs to be shared being missed. Although Companies House already works very closely with government departments, including HM Treasury’s OFSI and law enforcement agencies, this Bill will strengthen these existing relationships through enhanced data-sharing provisions.

This amendment seeks to impose a duty on the registrar only with regard to material information, which it leaves undefined. The imposition of such a vague duty could lead to confused and ineffective results and underlines the importance of the registrar being able to share data using a risk-based approach. Furthermore, information about individuals who are subject to this new sanction and any relevant licences will be published on the director disqualification register maintained by Companies House as well as on the UK sanctions list to ensure that the use of the sanctions measure is transparent. Discussions about implementing the new sanctions measure, including data sharing between Companies House, the Department for Business and Trade and the Foreign, Commonwealth and Development Office, are already under way to ensure that the new measure is effective. For the reasons set out above, I ask my noble friend not to move his amendment.