Criminal Finances Bill

Lord Judd Excerpts

3rd reading (Hansard): House of Lords & Report stage (Hansard): House of Lords
Tuesday 25th April 2017 Lords Chamber

[Lord Judd (Lab)]

My Lords, I declare an interest: I was Minister for Overseas Development, before moving on to the Foreign Office. I have served both professionally and voluntarily in the development sphere in various non-governmental organisations, including as director of VSO and subsequently Oxfam. To all of us involved in that work, the importance of the Bill, which I very much endorse, and of the amendment that has just been spoken to, cannot be overemphasised. Indeed, I noticed the other day that the Prime Minister, in saying in the Conservatives’ election campaign that they will stand by their commitment on overseas aid, emphasised that what was important was to make sure that the aid was being spent in the most effective way and not wasted.

It is terribly important to recognise that the people of too many developing countries are being robbed by their leaders, and that existing arrangements enable those leaders to get away with it. If we are going to talk about the effective use of aid, it seems to me that where we have the authority to take highly relevant and effective steps, we should do so. Yes, of course, we must put on record that Britain has taken great steps to provide world leadership in this sphere. It is leading the world already. That is why the remaining gaps are very ugly anomalies. I do not like to put it in these crude terms but it always seems to me that people either have some reason for not implementing immediately what is proposed or they do not, and if they do not, let us do it. If they are going to find ways of delaying—having still to work out arrangements and so on—this must raise suspicions that arrangements are going to be made in other respects as well.

From that standpoint, I say simply that, with all my experience in this sphere, this is a crucial matter. I congratulate the noble Baroness and her co-signatories on having stood by their guns. I hope the amendment will be taken seriously because I believe there could be a very important consensus in this House if we are prepared to put ourselves on record.

[Lord Blencathra (Con)]

My Lords, I wanted to intervene earlier in this debate following the speech of my noble friend Lord Kirkhope because I, too, wish to refer to Mr Cameron and the G8 summit.

First, I shall say that Amendment 8 is unnecessary but harmless, so I shall support it—but Amendment 14 is wrong and misguided for a number of reasons. First, we have no right, neither legal nor moral, to seek to impose our rules on law-abiding, self-governing British Overseas Territories. When I hear some of the NGOs outside this House talking about our overseas territories, I am appalled at their old-style colonial arrogance. One notorious campaigner against so-called tax havens has even suggested in his book that they should be closed down and the natives made to depend on overseas aid once again—and he calls himself moral. He is also one of the architects behind these proposals. I believe that we have no moral right because the United Kingdom creates more dodgy shell companies than some of the tightly regulated overseas territories and Crown dependencies. We need to come up to their standard, not the other way round.

Secondly, we should not impose these public register rules because the rules themselves are rubbish, as I shall attempt to explain. Not a single other country in the OECD is implementing this—and they have made clear that they never will. This public register wheeze was invented by my right honourable friend Mr Cameron in 2013. No other country will touch it with a barge-pole and the only reason that he was so keen then to foist this system on the overseas territories was so that he could point to others being in the same boat as himself and would not look isolated.

I was involved in the background at that time and had a meeting with prominent NGOs prior to the G8 in 2013. I asked them why they were not campaigning against the real tax havens of this world—Luxembourg, Delaware, Mauritius et cetera—but targeting the good guys such as our overseas territories. They responded that they had no chance of influencing policy in those tax havens, but that Mr Cameron was so desperate for a win at the G8 that he and the overseas territories were an easy, soft target.

I should make it clear for the record that at that point I was the director of the Cayman Islands office in London but that I have no connection whatever, either financial or otherwise, with the Cayman Islands Government now. However, I still deeply admire the way the territory is run and the exceptional level of integrity that it brings to financial services, which is greater than in the United Kingdom. I shall attempt to justify that.

Why do I say that our UK policy is farcical? Because it says that the way to get at dodgy persons setting up dodgy shell companies is to have a public register so that nosey parker NGOs can trawl through them and out those people. No—what you must do is stop them setting up dodgy shell companies in the first place. Jersey and Cayman are the top jurisdictions in the world, with by far the tightest regulations and checks on people setting up dodgy shell companies.

A few years ago an Australian professor at Griffith University, Professor Jason Sharman, did a huge experiment with his team on setting up shell companies. They created dozens of email and other addresses at different places around the world, from Islamabad, Nigeria and Moscow to London, New York and elsewhere. Many of the locations were highly reputable; others were places where you should hang on to your wallet if you get an e-mail saying you have £10 million to invest within them. The researchers sent messages to hundreds of corporate service providers around the world, which varied in credibility from, “We wish to establish an export base in your country for our long-established company” to messages from addresses in Pakistan saying, “We have a few million dollars and want to set up some companies in complete secrecy and want some fake bank accounts”. What was astonishing, according to Professor Jason Sharman’s research, is that while the majority of CSPs did not respond to the latter, highly suspicious messages—or told them to get lost—a very large number responded and were willing to help.

Professor Sharman’s team invented a rating system for the responses—and guess who came out top as the most difficult, indeed impossible, places in which to set up fake shell companies without supplying beneficial ownership information? Yes, it was little old Cayman and Jersey. I have Professor Sharman’s chart here, with them achieving 100%. Who was at the bottom of the heap, where you could almost walk in with a suitcase full of terrorist cash and set up a company with no questions asked? It was not Panama but individual states in the United States such as Delaware, Montana and Wyoming. They are way down at the bottom of the chart.

There are 2 million new companies created in the United States every single year. If you want to set up a dodgy shell company, you go to the United States—or rather, you go on to email and do it in under half an hour for less than $300. These states have said quite bluntly that they do not care what the President signs up to at federal level or at the OECD; they are in charge of company registrations in their state and will never in a million years go for public or central registers. They will not go for any more scrutiny before setting up companies.

Where does the United Kingdom come into this? Unfortunately, your Lordships can guess who was 13th from the bottom of the heap—below Vietnam, Panama and Ukraine. Yes, the United Kingdom was 13th from the bottom on creating dodgy shell companies, because we do it with insufficient verification of the beneficial owners. So clobbering Cayman, Bermuda and the BVI with rules which only they, not the other 19 countries of the OECD, would follow is misguided and foolish. I agree with my noble friend Lord Hodgson that we do not make the world a better or a more transparent place by hitting the good guys, encouraging the bad and letting all the Mugabes of this world go to the real tax havens to set up accounts.

Neither does the OECD ask for these public registers. The OECD merely wants all legitimate authorities to get speedy access to the relevant information so that the police, security services and financial regulators can check the legality of owners and their transactions. That is the point of access to beneficial information. I know that the Cayman Islands has been providing that information without any objection whatever for the last 10 years and has now implemented a system to give that information to legitimate authorities within 24 hours, seven days a week. That is a far better system than publishing registers.

It is perfectly legitimate for many individuals to create companies and seek to keep the ownership information private. There is no right for the public, nor for anti-capitalist NGOs, to know who owns private companies. But there is a need for legitimate law enforcement authorities to get speedy access to that information—and the overseas territories are in the forefront of providing it. What is more, I know that the information provided by the Cayman Islands, for example, will be verified by the authorities—as opposed to what will be supplied by Companies House, which does not verify the accuracy of anything. It is left to individuals to say to Companies House, “I promise that I’m telling the truth and I am who I say I am”. The overseas territories do not accept that.

So I ask this: will my noble friend the Minister give me an assurance that, in due course, the UK Government will make an attempt to get our beneficial ownership information in Companies House as up to scratch and as good as that in the best of the OTs? Our overseas territories should be lauded, not criticised, for their work on financial services. For these reasons, I oppose Amendment 14 and believe it should be rejected.