Investigatory Powers (Amendment) Bill [HL]

Debate between Lord Ponsonby of Shulbrede and Lord Fox

Report stage
Tuesday 23rd January 2024 Lords Chamber

[Lord Fox (LD)]

I shall be brief. Not for the first time, your Lordships are in debt to the noble Lord, Lord Anderson, for intervening on an issue that I think all of us failed to note. His request of the Minister is helpful, and I hope the Minister will be able to respond. There is an alternative process which I could suggest to the Minister—I have not had a chance to talk to the noble Lord, Lord Coaker, about this. If the Minister wanted to withdraw this amendment and bring it back at Third Reading, which is applicable in certain circumstances. I am sure we would be very flexible in permitting that as well.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, we support the introduction of the Government’s amendments. I echo what the noble Lord, Lord Fox, said about the amendment in the name of the noble Lord, Lord Anderson, and I look forward to the Government’s response on that point.

I would also be interested to hear what the Government have to say about my noble friend Lord West’s amendments. He has taken a keen interest in this part of the Bill, and I hope the Government will be able to answer the questions, in particular on data disclosure powers, as I think they can give a more detailed response to the expansion of disclosure powers to regulatory bodies than was given in the original legislation. It is also very likely to be further analysed and looked at as the Bill moves down to the other end of the Corridor. Nevertheless, we support the amendments as they are currently.

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[Lord Fox (LD)]

My Lords, I will move Amendment 21 and speak to the other amendments in this group in my name.

Amendment 21 specifies that the enforcement of retention notices applies only to UK recipients of such notices. It is one of a suite of amendments in this group that return to the issue of extra-territoriality— I see the Minister blow out his cheeks at the prospect. Amendments 22, 25, 28 and 31 are similarly directed and each largely seeks to limit extra-territoriality by ensuring that operators can make changes to their services for users outside UK jurisdiction.

The reason for tabling the amendments, the others of which I will not move, is that there remains a huge gulf of understanding between the tech companies and the Government when it comes to the interpretation of the Bill with respect to its territorial reach. I am again presenting the Minister with a golden opportunity to set out in clear language the territorial ambitions that the Government have for this Bill. I believe there is some element of miscommunication going on here, though I am not sure in which direction. I hope that the Minister can dispel that.

Clearly, we have international tech companies that are incorporated in another country with subsidiaries all around the world and data residing in many different domains—companies that offer services to customers all over the world. In essence, we need to understand what would happen as a result of this Bill if such a business proposed to change a global service that is used by consumers all over the world, including in the UK. How do the Government use this Bill to deal with such situations? I am looking forward to the response.

Amendments 23, 24, 29 and 30 would raise the threshold for calling in a change from “negative effect” to “substantially limit”. Again, this increases the bar before the Government can start the process. Negative effect is a very low bar which will catch almost everything. It is not in the interests of the authorities to have everything coming through. There needs to be some sense of funnel. This is an opportunity for the Minister to define what negative effect is and what it is not, because it is a very low bar. He would be wise to take our advice and look at the language there, certainly when it comes to the code coming later.

Moving on, my Amendment 27 is a retread of an amendment I tabled in Committee, and it was there as a placeholder. I am pleased to see that it is unnecessary, as government Amendments 26 and 32 very much embrace the spirit of what I was seeking to achieve in that amendment. I thank the Minister for responding, and therefore will not be speaking to or indeed moving Amendment 27.

I now turn to Amendment 35. Currently, while there is a requirement for the Secretary of State to consult the operator before giving notice, there is no requirement on the Secretary of State to consult ahead of making regulations that will specify what “relevant change” includes, and therefore what needs to be notified. My Amendment 35 therefore introduces a requirement for pre-legislative consultation on the definition of “relevant change”. The amendment specifies that the Secretary of State must consult the Technical Advisory Board. There is a precedent for consultation with this board in Section 253(6) of the 2016 Act. As your Lordships know, the Technical Advisory Board is comprised of independent and industry representatives; the amendment also specifies a wider range of consultees.

The amendment then requires the Secretary of State to have regard to the impact on users, including on their privacy and on operators’ ability to innovate. Again, there is precedent for this in the 2016 Act. Such considerations must be taken into account when a public authority is deciding whether to issue a TCN or NSN, or where a judicial commissioner approves a DRN. As such, we feel it is worth while also to consider these factors when legislating for a “relevant change”, because delaying a critical security update could negatively impact users and operators. In a sense, all we are asking for is consultation. We are not asking to change the law, and this gives the Government a power to abide by that consultation or not. But we feel that this is an important definition, and it needs to be more widely consulted on.

I hope the Minister will agree, but in the event that he declines, I will be moving Amendment 35. I beg to move Amendment 21.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, we have had much welcome interaction from stakeholders on the issues summarised in this group, as well as some useful briefings from the Home Office and the noble Lord’s team, for which we are grateful.

As the noble Lord, Lord Fox, has just said, there appears to be a gulf in both position and understanding between the Government and the tech companies, both on the principle of the notice and its details, which is, in a sense, frustrating scrutiny of the Bill. I understand that there is a disagreement about the introduction of notification notices in general. It is right that we look at the details to ensure that the process takes place in a way that reflects the realities of international law, and the need of the intelligence services to maintain levels of data access and the necessary safeguards.

Concerns raised by stakeholders keep striking at the same places: how this notice would work with access agreements with other countries; why there is no double lock on the notification notice, despite the clear impact it would have on tech companies’ activities; and why the definition of telecoms operator is perhaps in reality wider than the Government intend.

We will not be supporting Amendment 35, in the name of the noble Lord, Lord Fox, although we understand the intent behind it. We encourage the Government to keep talking to stakeholders, and we believe that this part of the Bill will benefit from further discussion in the other place.

Economic Crime and Corporate Transparency Bill

Debate between Lord Ponsonby of Shulbrede and Lord Fox

Report stage
Tuesday 20th June 2023 Lords Chamber

[Lord Fox (LD)]

My Lords, again this is a group of amendments with which we can thoroughly agree, which is a nice position to be in. Government Amendments 5 to 11 speak for themselves in the sense of tidying up the situation in Northern Ireland. The one amendment that is worth dwelling on a little bit is government Amendment 50, which gets to the point around resources and having sufficient resources for Companies House to be able to do what it needs to do.

There is a certain irony that, if the Companies House team is successful, there will be fewer companies on the register. So one of the things they will need to consider about fees is that they will be reducing the number of companies or the amount of income that will come per company. One of the issues in setting them is that, if estimates of 5% of companies being fraudulent are right, there will be 5% fewer companies paying the annual renewal. Some people, and some organisations, put that number much higher, so I suggest that the Government think about the success that Companies House will hopefully have in order to set a fee that does not become self-defeating if it removes companies.

The more companies the team removes from the register, the less money Companies House receives in annual renewal. That is the point I am making. I am assuming that this number will come quite soon after this Bill becomes an Act, and it would be useful for the Minister to update us on when we think the secondary legislation will come, because, clearly, Companies House and others will rely on this money for planning ahead. I am assuming the money goes to Companies House and not the Treasury, but perhaps the Minister could confirm that.

If the Minister could say a little around the operation of Amendment 50, that would be helpful—so that I understand it even if everybody else already does. He could say a little about how much money and how changeable it will be in the event that more money is needed to support the drive to remove criminality from our companies. I think that everything else is broadly very welcome.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, we agree with all the amendments in this group. This group is all government amendments which make minor changes to ensure that penalties align with previous legislation, that they are taken into account when setting fees and that penalties do not stop criminal proceedings, as the noble Lord explained introducing the amendments.

I take the point the noble Lord, Lord Fox, made about Amendment 50. I presume fees can be updated as the situation evolves regarding the number of companies on the register. Nevertheless, we support this group of amendments and look forward to the Minister’s response to the questions asked by the noble Lord, Lord Fox.

Economic Crime and Corporate Transparency Bill

Debate between Lord Ponsonby of Shulbrede and Lord Fox

Committee stage
Tuesday 25th April 2023 Grand Committee

[Lord Fox (LD)]

My Lords, I will speak to Amendment 78 in my name and also more generally. I thank the team sitting behind the Minister who met me last week to try to see through this. I was somewhat reassured by what they had to say, but a couple of points hinge around the words “UK-connected” in describing crypto assets.

What we know about crypto is that it is connected nowhere. A number of crypto concerns are now administered under UK financial administration, but a whole lot more are not. Clearly, if the authorities were able to seize a crypto wallet, that would perhaps offer a greater opportunity for confiscating assets than having to go through the courts with these crypto-asset services. This may have limited application in the real world, when we get there. I do not think it is a bad thing and it is not a problem, but I do not think we should raise our expectations particularly high when it comes to being able to confiscate these sorts of assets.

To some extent, that is what sits behind my modest amendment, which seeks to require the Secretary of State to review the adequacy of the definitions of crypto assets and, by definition, how they can be confiscated under the Bill. The Secretary of State would have to lay a report before Parliament within 18 months. Because everything is changing so quickly in this sphere, it does not seem unreasonable to ask the Government to come back to Parliament and tell us how it is going. It is quite clear that new crypto assets are popping up every day. Who would have thought of NFTs as being crypto assets at all even a couple of years ago? Are they included in this? I assume that they are.

New digital assets will emerge over the next 18 months and beyond and it is sensible for the Government to keep Parliament in touch with what they are trying to do to bring these assets to book when appropriate. We welcome the changes in so far as they go. I do not think we should get too excited about them, but we should ask that the Government and the Secretary of State keep Parliament in touch with the changes that are going on all the time.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, this is a slightly unusual debate, in that we have a lot of very specific amendments tabled by the Government. The noble Lord, Lord Fox, has opened the debate by talking about how fluid the situation is when dealing with cryptocurrency and crypto assets as a whole, and other amendments in subsequent groups will deal with particular aspects.

Just by chance, yesterday evening I bumped into a former magistrate colleague of mine, John Glen, previously the Economic Secretary to the Treasury, who told me about a speech that he gave on 4 April last year in which he set out the Government’s approach to crypto assets and the whole issue of trying to manage that approach in this fast-evolving world. I agree with the first point made by the noble Lord, Lord Fox. We all acknowledge that this is fast-moving and the Government are doing their best to position themselves to be at the centre of developments and well-connected worldwide, as the understanding of the practical input and use of crypto assets is properly assessed, while also trying to bear down on the criminal activity that is undoubtedly prevalent within these assets.

Having read John Glen’s speech, in which he outlined the Government’s detailed plan, I will just mention some of the key points that he made, and perhaps the Minister can then say something about the Government’s approach to dealing with this fluid situation. John Glen’s first point was about stablecoins, which are a way of trying to harness technologies such as blockchain for the benefit of government by, for example, tying the pound to some form of cryptocurrency. That was being looked into and it would be interesting to know how that is going.

Another element of the plan outlined in John Glen’s speech was to ask the Law Commission to look at decentralised autonomous organisations, which are basically the groups that will run these crypto assets and the like. If there is any progress report on the work of that task force, that would be very interesting.

John Glen also talked about a sandbox, to be run by the Bank of England and the FCA, which will look at ways to manage the evolutionary process of regulation. I absolutely understand that is a difficult thing to do. Finally, he announced with some fanfare that the Royal Mint will create its own non-fungible token, or NFT. I do not know how that is going, but I would be interested to hear what the Minister has to say about that—

[Lord Fox (LD)]

I think that was cancelled.

[Lord Ponsonby of Shulbrede (Lab)]

Well, it is indeed a fast-moving world.

We support the amendments in this group, but I would be interested to hear if the Minister could say something about the wider strategy in trying to make sure that the British Government are part of the development of these technologies, while bearing down on sources of fraud and money laundering.

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[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?

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I agree with all the points that have been made by noble Lords. When on the previous group the Minister read out the figures recovered, they were derisory compared to the amount of dirty money that it is speculated is washing around the systems for which we are responsible. The whole thing is extremely important. The noble Lord, Lord Agnew, speaks with great authority on this matter. He is an insider and, as the noble Lords, Lord Fox and Lord Vaux, said, this is a way of getting proper enforcement into the Bill so it has proper teeth and so that HMRC can reprioritise not just tax generation but its work against money laundering. We support the amendment.

Economic Crime and Corporate Transparency Bill

Debate between Lord Ponsonby of Shulbrede and Lord Fox

Committee stage
Thursday 20th April 2023 Grand Committee

[Lord Fox (LD)]

Perhaps the noble Lord, Lord Leigh, can confirm this at the end of the debate, but it is not clear to me whether losing your auditor before you appoint another would be reportable within the subject of his amendment. That is a key diagnostic, which he did not mention, of trouble afoot within an organisation. One of the benefits that we would have seen if the fourth member of the Vaux/Fox/Faulks/Foulkes group—the noble Lord, Lord Foulkes—had been here is that he would have emphasised very fully that had we seen the loss of an auditor in a particular case, we would have known that there was trouble. So, there is another element to the argument made by the noble Lord, Lord Leigh, that, in a sense, this is a very good diagnostic.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I agree with everything that has been said. I too was going to allude to the case of the SNP and to make the point about auditors resigning before they are replaced. That is obviously a warning sign. I am intrigued to hear the Minister’s response. It seems such a practical suggestion. I will leave it at that, because the ball is in his court.

Economic Crime and Corporate Transparency Bill

Debate between Lord Ponsonby of Shulbrede and Lord Fox

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Fox (LD)]

There appears to be a chorus of agreement, so I will not add terribly to its length. This is just to thank the noble Lord, Lord Leigh, from whose knowledge of this area we benefit. We should be in a position to listen.

We had a meeting with officials yesterday, and my read-out is that the reason for the government resistance to the previous versions of these amendments referred to by the noble Lord, Lord Leigh, was, in a sense, practical. The accounts are signed off by the board and auditors, and something needs to be done thereafter to tag them. The departmental team seemed worried that something might go wrong in that tagging process, so we should not go down this route.

Having prepared more than 20 company accounts—I concede that they were largely for large businesses—this always happens. The board signs off a set of accounts and then prepares to communicate it in a number of different media. The accounts are put in an annual report, a Stock Exchange announcement system and a website. In each case, there is a process to make sure that the read-across is performed correctly. I suggest that the practical constraint that somebody might do something wrong does not outweigh the benefit of mandating this tagging process across the board.

I agree with the noble Lord, Lord Leigh, and others that micro-companies should still be included in this process.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I think the consensus continues. I thank the noble Lord, Lord Leigh, for introducing this group. As he said, this set of amendments really repeats those spoken to earlier, but in this case concerns micro-entities. He made the points about either accidentally or deliberately tagging wrongly, and that not seeming a substantial argument against increasing its use. As the noble Lord, Lord Fox, said, companies are well used to producing and presenting accounts in different media and ensuring that they are presented consistently across them. This tool should extend their use.

I also agree with the noble Lord, Lord Leigh, and others that the Clause 54 stand part debate in the name of the noble Lord, Lord Sarfraz, is not appropriate for the Bill. As others have said, micro-companies are not actually that small. Some numbers have been presented, but the figure I have is that 1.3 million micro-entity accounts were filed in 2019-20, the largest proportion of accounts filed with Companies House. The figures I have are of a turnover of less than £632,000 on a balance sheet of £316,000 with 10 or fewer employees. Over the years, I have been involved in a number of businesses of that sort of size, but they can and do sometimes grow into much larger businesses. There needs to be consistent tracking of these companies to see where they have come from and make predictions about where they might go, so I agree with the point on that made by the noble Lord, Lord Leigh.

Other noble Lords agreed with this point, so I hope that the Minister will resist the argument that Clause 54 should not stand part, if the noble Lord, Lord Sarfraz, chooses to speak to it, and is sympathetic to the amendments from the noble Lord, Lord Leigh.