Antisemitism in the UK

Baroness Hodge of Barking Excerpts

Monday 19th February 2024 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I do apologise; I called two Members from the Government Benches, so I will now call two from the Opposition Benches.

[Dame Margaret Hodge (Barking) (Lab)]

I welcome the strong statements made by the Minister and the shadow Home Secretary. I hope that, in tackling the deep-seated antisemitism to which the hon. Member for Brigg and Goole (Andrew Percy) referred, we can work in a united way across the House, and not seek to make cheap political points on any individual cases.

We have had attacks on Jews in theatres in London; we have had attacks on Jews in campuses, particularly in Leeds and Birmingham, as other hon. Members have said; and, as the right hon. and learned Member for Northampton North (Sir Michael Ellis) said, a judge has failed to penalise three people for glorifying terrorism in London. People in all sorts of sectors, locations and areas across our country are worried that antisemitism is spreading. The Government’s response needs to be co-ordinated. When will a new hate crime action plan be published? The last one, despite consultation in the interim, was published five years ago.

[Chris Philp]

I share the right hon. Lady’s horror at the various events highlighted in the Community Security Trust’s report, including an incident at a theatre where a Jewish man was essentially hounded out—a disgraceful and despicable act that has no place in a civilised society such as ours. She mentioned the case that the former Attorney General, my right hon. and learned Friend the Member for Northampton North (Sir Michael Ellis), raised. I spoke to the current Attorney General earlier today, and I understand that the Crown Prosecution Service is reviewing that case as well; it deeply concerns me, as I know it concerns the right hon. Lady.

Our strategy in relation to extremism is something that the Communities Secretary continues to consider, but the approach the Government have taken is one of action, rather than words. For example, we have legislated via the Online Safety Act, which contains some very strong measures, as I said to the shadow Home Secretary a few minutes ago. When I was technology Minister, she and I discussed at some length the measures needed in that Act to combat hate—measures based, in fact, on some of the terrible experiences of antisemitism that the right hon. Member for Barking (Dame Margaret Hodge) has herself suffered. I have talked about the increased funding for the Community Security Trust, the Department for Education’s plan in universities and schools, and the extra money for the Holocaust Educational Trust, so the Government are taking action rather than simply expending more words. However, as I said, this is an issue that the Communities Secretary is extremely alive to.

National Crime Agency Investigation: Javad Marandi

Baroness Hodge of Barking Excerpts

Tuesday 16th May 2023 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I thank the hon. Member for Glasgow Central (Alison Thewliss) for tabling the urgent question and you, Mr Speaker, for granting it. These revelations are completely damning. There is an investigation into the Azerbaijan laundromat. A total of $2.9 billion was stolen. It was laundered through UK companies and used to bribe politicians and line the pockets of the corrupt Azerbaijani elite, and Javad Marandi is linked with it. Now we hear that he donated three quarters of a million pounds to the Tory party, got an OBE and access to Government Ministers. We should take these allegations very seriously. If they are true, dirty money has well and truly crept into our politics. The Conservative party will not regulate itself, so will the Government bring forward regulations requiring all parties to do due diligence and checks on the source of all political donations? Will the Minister make sure that this donation is returned, and will he investigate and report back to Parliament on any access that Mr Marandi got to Government Ministers because of his large donations to the Conservative party?

[Chris Philp]

As I have said, the rules in this area are being debated as the National Security Bill passes through the House. They are currently being debated in the House of Lords and, as I said in response to the shadow Minister, they may well return here in the course of ping-pong. I welcome the National Crime Agency’s investigation and court action, because no one wants to see dirty money flowing through London. The fact that the NCA is taking action is therefore to be welcomed. I gently repeat the point I made previously, that people are entitled to be assumed innocent until proven guilty. Issues of this kind are not exclusive to one side or the other; I have referred already to the foreign agent of the Chinese Government who was linked to a senior Labour Member of Parliament. In that context, all political parties—not just the two main ones, but the others too—need to exercise caution and vigilance in these matters, for all the reasons that the right hon. Lady just outlined.

Economic Crime and Corporate Transparency Bill

Baroness Hodge of Barking Excerpts

Report stage
Wednesday 25th January 2023 Commons Chamber

[Tom Tugendhat]

The Bill is concerned only with economic crime and corporate transparency, and the regulations will cover only that. Many Ministers, including the Lord Chancellor, have spoken about SLAPPs—I will touch on them later—but the reality is that they require a separate jurisdiction and a separate Bill.

Government amendments 48 and 49 concern information sharing. In Committee, Opposition Members rightly pointed out that our proposed definition of large accountancy firms did not include insolvency practitioners, auditors and tax advisers. I thank them for that. These amendments will rectify that omission by expanding the scope of the indirect information sharing clauses to include those sectors.

In addition to the Government amendments, several other amendments on a broad range of topics will be debated today. As in Committee, I look forward to what I anticipate will be a lively but extremely well-considered debate. The contributions of all hon. Members who participated in earlier debates have helped to shape the Bill into an effective tool to tackle illicit finance and ensure that the UK is a great place to do legitimate business.

I know that there are places where hon. Members would like the Bill to go further and do more. Indeed, I am as keen as many of them to solve some of the outstanding problems that we all wish to address, but we need to ensure that those ambitions are delivered in the most effective way and that we use the appropriate legislative vehicles to ensure that they have the desired outcome. Limiting the scope to just economic crime can, in several cases, create more problems than it solves, and I assure right hon. and hon. Members that I have strenuously tested what can be effectively delivered within the scope of the Bill.

[Dame Margaret Hodge (Barking) (Lab)]

Will the Minister expand on that interesting point? How would any of the amendments on SLAPPs, a duty to prevent or seizing assets limit what could be done in future?

[Tom Tugendhat]

The question is at what stage do we bring a Bill forward—do we wait for it to be perfect or do we bring forward what we can get at a certain point? The right hon. Lady raises some interesting points. She knows my views on SLAPPS; indeed, in a former incarnation, I may have expressed them extremely clearly. She knows that we share views on asset seizures too. I should point out, however, that no common law jurisdiction has successfully solved the question of asset seizures, although many of us have tried and, indeed, some of us are in conversation with others to try to work out ways of doing it—forfeiture and seizure are not quite the same thing.

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[Stephen Kinnock]

That is precisely the point. There is an opportunity to generate revenue that could be deployed to address the causes of the problem. It is a win-win. We have criminals. We need to crack down on those criminals. We need to ensure that the agencies are given the resources to do that. It is the criminals who should be paying for that process. That seems logical to me.

[Dame Margaret Hodge]

Further to that point, does my hon. Friend agree, and I hope that the Government agree, that if they were more assertive in pursuing the people who enable economic crime and those who commit economic crime, more fines could be generated, which they could ringfence for a fund to be used in part to compensate victims of crime? It need not be a burden on the taxpayer and it could be a just way of ensuring that the victims of economic crime do not suffer inappropriately.

[Stephen Kinnock]

Again, my right hon. Friend has hit the nail on the head. We need a war chest and that should be built up on the basis of moneys paid by criminals. That war chest should also be looked at and used, where possible, to support the compensation of innocent victims of economic crime. The new clause is a two-pronged attack on the issue. The opportunity is there because the better we get at going after these criminals, the more we will have coming into the war chest.

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[Sir Robert Buckland]

My hon. Friend is absolutely right. Of course, he was a Minister in the Ministry of Justice when the Bribery Act was brought into force at the end of the 2005 Parliament, and he has direct experience of this issue. He is absolutely right that the Bribery Act has been of huge value. In fact, under the regime of deferred prosecution agreements that the Government brought in in the early part of the last decade, of the 11 DPAs that have been made by the Serious Fraud Office with corporates, nine were for “failure to prevent offences”—failure to prevent bribery—and just three were for the offence of fraud. That accounts for 90% of the £1.7 billion in revenue that the SFO has brought in through DPAs. It is clear that that has been an important step change in the way we deal with wrongdoing or indeed the threat of wrongdoing.

For people who think this is some sort of academic exercise, I draw their attention to the LIBOR scandal and the forex rate rigging scenario. There was no bringing to account of anyone involved—there was impunity. That is not good for the rule of law or the economic wellbeing of this country.If we want people to invest in the United Kingdom—we do and we have excelled in direct foreign investment over generations—then they need to have the confidence that if there is a problem, there is redress of grievance, accountability and a way of recouping the loss or making sure their investment is safe. That is what I believe the new clauses go to.

We have been careful in the test we wish to apply to the “failure to prevent” offences that form the subject of new clauses 4 and 6. It was tempting to follow the recommendation in the report by the House of Lords’ Fraud Act 2006 and Digital Fraud Committee, chaired by my noble Friend Baroness Morgan of Cotes, to apply the wider test contained within the Criminal Finances Act 2017 relating to failing to prevent tax evasion. That would not require an intention by the corporate or the individual to confer a benefit on the company or a benefit on a person to whom the suspect—the defendant— is providing services on behalf of the company. I have sought not to go that far, but to replicate the Bribery Act test, which is the intention to confer a benefit. It is important that when we seek to draft legislation, we are as mindful as possible of not widening it to an extent that could in many ways create further unfairness. We have an obligation to ensure that balance is maintained.

I have set out three separate offences in the provisions: fraud, money laundering and false accounting. I think fraud and false accounting are probably self-explanatory, but the Government might have a bit of a question about money laundering. They might be thinking about the 2017 money laundering regulations, and regulation 92 in particular, where there is already a corporate offence where, with the consent or connivance of an officer of the company, an offence is committed or an offence is attributable to neglect on their part. What I would say gently to the Minister is that I do not think that cuts it. It still leaves significant evidential and prosecutorial challenges. The Financial Conduct Authority has, I think, used it vanishingly rarely. Therefore, I urge him very strongly to look carefully—I hope he will accept the thrust of my argument, even if he cannot accept the detail of my new clauses today—at bringing forward provision that covers money laundering as well as fraud. That would be my strong exhortation to him today.

[Dame Margaret Hodge]

I want to add to the excellent speech that the right hon. and learned Gentleman is making and to thank him for it. In the Barclays case, there was an attempt to prosecute both Barclays bank and individual directors of Barclays bank. There was an unsuccessful appeal against Mr Justice Jay’s decision, in which the SFO argued that the dual rulings would allow directors to “insulate themselves from liability” and make such alleged offences “impossible to prosecute”. Later, Ms Osofsky, who runs the SFO, said she felt herself completely hamstrung by the directing mind principle. She told parliamentarians in evidence that

“I can go after main street but I can’t go after Wall Street.”

In other words, she could prosecute small companies, but not corporates with layers of control.

[Sir Robert Buckland]

The right hon. Lady leads me to the thrust of my argument on new clause 5, which is the identification doctrine itself. She deals with the precise point of the doctrine. In the Barclays case, Mr Justice Jay at first instance was widely seen as having defined it by a narrow interpretation—I do not criticise the learned trial judge, but many people saw it that way—but the decision was upheld on appeal. With a real-life set of facts, a trial judge made a ruling that had quite important consequences for the law.

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[Sir Robert Buckland]

I am always grateful to my right hon. and learned Friend; I greatly enjoyed our time working together as Law Officers, and I yield to no one in my respect for him. He is right to make that point. I think I couched my remarks in a way that was faithful to the Law Commission’s options, which say that the Government do not necessarily have to do it all—there is a choice here, potentially. On a wider basis, I think that the identification doctrine needs to be looked at. There could be an opportunity for further refinement, perhaps in the other place, and for provision to be made that refers specifically to the offences that I list in new clause 5.

Let me take my right hon. and learned Friend’s point in the spirit in which he made it, and build on it. New clause 5 includes the specification in Law Commission’s option 2B that an

“organisation’s chief executive officer and chief financial officer would always be considered to be members of its senior management.”

We have sought to be faithful to option 2B.

[Dame Margaret Hodge]

I am sorry to interrupt the right hon. and learned Gentleman’s excellent speech again, but does he share my view that we are past the stage of consultation? There has been a lot of consultation on the issue, from 2015 to 2017 and up until the Law Commission’s proposals in 2022. Choices now have to be made. The opportunity must be grasped to legislate on this issue, on which there is such wide consensus and such strong feelings.

[Sir Robert Buckland]

If not now, when? I entirely agree.

I had not quite finished outlining the Law Commission’s point correctly refuting, or at least addressing, the perception of any problems with a knock-on effect on civil law liability. It sets out the case very well, giving two basic reasons why it does not think that there will be extensive consequences.

First, the Law Commission rightly says that in civil law, vicarious liability or liability for negligence will very often apply to civil disputes between companies and third parties even if the identification doctrine test threshold is not met, so those very important parts of civil liability will not be undermined.

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[Mr Davis]

There is no doubt that the more recent you are, the more salient the case. Frankly, I can remember being ashamed of a British Prime Minister hosting Putin at the Olympics only a few years after Litvinenko was murdered in our country in the most cruel and overt act of state terrorism. Neither Government dealt with that. Cameron’s action was grotesque in the extreme, but neither Government dealt with it. Similarly, both Governments kowtowed to China after Tibet and all the rest of it. That has been done too many times. It is the entire system, not just one Government or another.

London is a fabulously attractive place for the Russians or the Chinese. If you want to be somewhere else than Russia, this is the place to be. We have facilitated that at every turn. Here comes the issue to which SLAPPs relate. We have a legal system that is probably the most brilliant in the world in delivering fair outcomes and good justice, but it is also phenomenally expensive, which means it is one-sided in its operation between an oligarch and an ordinary citizen, journalist or whoever they may be.

In conjunction with that are the things that flow from it, such as the behaviour of solicitors, to some of whom my hon. Friend the Member for Isle of Wight (Bob Seely), who is not in his place, gave a fair old pasting yesterday, but one that was deserved. The private investigators industry, unregulated, undertakes crimes to gather information for use as weapons against other people. Our courts—not uniquely, but outstandingly—allow that information to be used. In each individual case that might be the right decision, but the collective effect of that is to suck criminally based information into our system and therefore engender and help the industry.

All that is why new clause 1 and 2 are vital. That all had the effect of creating a vast, possibly unintentional institutional cover-up for criminal activity: money laundering, fraud and concealment of evil actions abroad. Let us bear in mind that some of the oligarchs we are talking about are murderers. The system murders people. It is evil activity. That is why new clauses 1 and 2 are incredibly important.

What the right hon. Member for Birmingham, Hodge Hill is proposing in new clauses 1 and 2 is a second best option. We already heard the best option in earlier interventions: a freestanding Bill immediately, because this is happening now. There are court cases going on as I stand here in which people are having their lives destroyed by SLAPPs. The next best is to have it in the Bill of Rights, but we know that that is way down the timetable, for all sorts of reasons. We may not see it before the next election, in which case we will have lost two more years.

The new clauses amount to a way of dealing with this criminal—or near criminal—activity in a way that is not susceptible to a finely turned piece of law. I listened with fascination to my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) on that point. Getting that right is difficult; getting this right is not, because the greatest enemy of evil is a free press. In our country in the last couple of decades we have allowed our free press to become gagged and crippled. If we can take that gag away and remove those bonds, we will suddenly expose all the things that we need to deal with. We will see the weaknesses I talked about—the SFO and the NCA—and put them right, one by one. That is why we should support new clauses 1 and 2. I talked before about the weaknesses of the SFO and the NCA. We will see those weaknesses and we will put them right, one by one. That is why we should support this measure today.

[Dame Margaret Hodge]

I shall be very brief, because I took a lot of time in the House yesterday. I strongly support many of the new clauses being moved by Back Benchers across the Chamber today. If I can just say something about politics, this heartens me and shows that there are ways in which we can work together to pursue the national interest across the political divide. It breathes a bit of confidence and life back into the political process that we have all chosen to join in our careers, so I commend those individual Back Benchers who have put themselves forward and who are speaking today.

The proposals from the hon. Member for Cheadle (Mary Robinson) on strengthening the support for whistleblowing are hugely important. Whistleblowers are an essential part of our armoury in the fight against money laundering and fraud, and we know that, despite all the legal rights, they are not protected. People lose their jobs, their families get destroyed and they are left penniless. Therefore, the establishment of a capability that will do nothing other than protect and promote whistleblowers in the crucial work they do is really important, and I hope that it will be adopted.

The importance of legislating to tackle the abuse of our legal system by oligarchs and others, which the right hon. Member for Haltemprice and Howden (Mr Davis) has just talked about so eloquently, is also really important. I want to be blunt about this and say to those on the Government Front Bench that, if they do not accept this new clause, they will not get a Bill during this Parliament. I bet that is right, so for heaven’s sake let us use this opportunity to get this bit of legislation in. It does not cover everything we would like it to cover, but it will have an impact. It will also give us the experience to see whether we have got the legislation right. I am sure that all the lawyers who helped to draft these new clauses put their best brains into them, but if they have not got them right, we will be able to learn those lessons when we come to extend these measures beyond economic crime.

The right hon. and learned Member for South Swindon (Sir Robert Buckland) made an excellent contribution on the reform of criminal corporate liability, and I want to say something about that. It is not that we want to suddenly bang up a whole load of lawyers, accountants, companies, service providers and all those people who we know are the ones that facilitate or collude with much of the economic crime that takes place. Only the best preventive mechanism that we can think of will force a change of behaviour, and we are not doing that on the back of hope; we are doing it on the back of reality. We know from the Bribery Act 2010 and from the regulations on tax evasion and on health and safety at work that putting this sort of liability on individuals and corporations is the only way to transform behaviour. Last week’s amendment to the Online Safety Bill by the Conservative rebels showed the mood of the House, and I would urge Ministers to think about that. The mood of the House is to use this effective tool to try to transform behaviour in all spheres of life, whether in relation to online harms or to economic crime.

I hope that we will hear from the hon. Member for Huntingdon (Mr Djanogly) soon on the issue of “freeze not seize”. I know he is going to make a number of propositions, and I hope he will not mind if I say something about this. We have been working with an extensive group of lawyers to see whether we can move to a position where we do not just freeze the assets but seize them in order to repurpose them and, particularly in the current context, use them to support the reconstruction of Ukraine. We have finally got a chink in the armour in that regard, but let me say something else first. The lawyers we have talked to work with non-governmental organisations in this field, and the advice they give is always going to be slightly different from the advice that comes from the lawyers working in the Government service. I think we bring a new perspective, and I urge Ministers to listen to what we have to say. The chink is worth examining at this stage, even if we do not go for the further propositions, to show that we mean it when we say that we want to seize this money.

[Tom Tugendhat]

If the right hon. Lady can come up with a way to seize assets and use them for the purposes we have been discussing—notably for the reconstruction of Ukraine, but for other purposes, too—I am all ears. I have had long conversations with the representatives of Governments around the world, and I am yet to hear an idea that works. If she has one, I am happy to hear it.

[Dame Margaret Hodge]

This is not our idea. It comes from a recent seminar we held with lawyers who support the Royal United Services Institute and Spotlight on Corruption. I will leave it to the hon. Member for Huntingdon to expand on it, but I think it is a very interesting chink that we can exploit, although it is not the total answer.

A draft Bill is being prepared by another group of lawyers, but I do not think we can add it to this Economic Crime and Corporate Transparency Bill. I am sceptical that we will find a chance to introduce the draft Bill in this Parliament, but I assure the Minister that we will pursue it after this Bill has passed. I just hope the Government examine the chink we have identified and run with it.

New clause 21 on cost caps, which stands in my name, is part of the way in which we could better fund the enforcement agencies in their fight against economic crime while also preventing economic criminals from exploiting our legal system. At the moment, we have a “loser pays” law, which has two consequences. First, when our enforcement agencies embark on litigation and lose, there is a massive cost to the public purse. We saw that with the unexplained wealth order against Kazakhstan’s Nazarbayeva family. Subsequent investigative journalism suggested that the family told mistruths to the court, but that has never been rectified. Nevertheless, the costs vary from £1.5 million to £2 million.

The SFO took a similar case against Serco involving prisoners who were—I have forgotten the word.

[Tom Tugendhat]

Tagged.

[Dame Margaret Hodge]

I thank the Minister. I am having a senior moment.

The SFO had clearly prepared the case badly, but there was a discovery point that got the litigation thrown out of court, and a huge sum was claimed in costs. The cost to the public purse is enormous.

[Kit Malthouse (North West Hampshire) (Con)]

I understand the right hon. Lady’s point about the cost to the police and other authorities of failed investigations but, in my experience, much of the problem stems from the division of the spoils in those cases that succeed in securing the proceeds of crime. As she will know, the money is divided between the Treasury, the Home Office and the police.

When I was at City Hall, we tried to cut a better deal in which the police would effectively recover the full cost of a prosecution, and any profit would then be split, so that pursuing such prosecutions would be costless to the police. Tim Godwin was then deputy commissioner of the Metropolitan police, and his view was that the police would then have a strong case to invest even more in this line of investigation, and they would therefore have more success and there would be more money to go around for everyone. It is not necessarily the case that legislation will solve the problem. It is more to do with the deal between the police and the Government.

[Dame Margaret Hodge]

Indeed, and we considered an amendment in yesterday’s debate to address that specific issue, so that any funds arising from a confiscation order, or other such order, could be enjoyed by the enforcement agencies themselves, which would provide an additional incentive. We discussed last week’s Danske Bank settlement of criminal issues in the United States, from which the enforcement agencies received $2 billion. Just imagine the amount of enforcement activity that could be funded from that fee. We are timid in that regard, so I completely concur with the right hon. Gentleman on that.

The other argument in relation to cost caps is that the fear of facing huge costs if one fails in a case provides a disincentive to the enforcement agents to pursue as vigorously as one would like economic crime prosecutions. The Minister has said to me previously that there is no evidence to back that up, but I just do not buy that. A proper analysis of how people in the NCA, the Serious Fraud Office and other agencies think before they decide to pursue a prosecution would very quickly reveal that there is a disincentive. It is for those two reasons that we considered cost caps. The US is our model. Each party bears its own costs, which is much more effective. We heard figures yesterday—I will not repeat them because I have to get on—that the US gets much more money in and it does not cost as much to its enforcement agencies.

Those are the things that I wanted to cover. I hope that, in summing up, the Minister will please give us some concessions. I urge him to reflect on the degree of unanimity across the House and on the very senior figures on his own Back Benches who have chosen to work, in particular, with members of the two all-party groups to reach consensus. We do argue these things out. We come to a view after an extensive debate on a subject; it is never an open and shut case. Back Benchers are in a better position at present than those on the Front Bench, so I ask the Minister to listen to us because we may just be right and it would be good if there was a concession on something.

[Mary Robinson (Cheadle) (Con)]

I rise to speak to new clause 7, which is in my name, and the names of Members across the House. It would require the Secretary of State to set up an office for whistleblowers within 12 months of the Bill receiving Royal Assent, and as chair of the all-party group for whistleblowers, I wish to register my interest.

The office for whistleblowers would be an independent body, which reports to Parliament and would have three main duties: to protect whistleblowers from detriment resulting from their disclosures; to ensure that these disclosures are investigated; and to escalate information and evidence of wrongdoing that is outside its remit to the appropriate authority, including regulators or, if appropriate, the police.

I thank the right hon. Member for Barking (Dame Margaret Hodge), who introduced this new clause at Committee stage and spoke to it robustly and with the knowledge and passion of someone who has been pursuing this for many years.

Despite a complete lack of reference in the Bill, whistleblowers and whistleblowing have a pivotal role in the fight against economic crime. Indeed, when this proposal was debated at Committee, the right hon. Member for Barking referenced her time as Chair of the Public Accounts Committee and noted that all the work that the Committee did on economic crime came from whistleblowers, and yet, in a Bill that seeks to tackle economic crime, whistleblowers are not referenced.

One statistic that has been shared many times when debating this subject in Parliament is that 43% of economic crime is detected and exposed through whistleblowers. However, in his response to the Committee debate, the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) noted that he believed that about 100% of economic crime detection could be attributed to whistleblowing. Once again, that appears to be confirmation that, if we want to know where an economic crime is being committed, it is most likely to be a whistleblower who exposes it.

The objectives of the office I propose in this new clause would be to encourage support and advise whistleblowers, providing a safe place to share information and acting on evidence of detriment to the whistleblower. We simply must protect whistleblowers who speak out, risking retaliation, as we have heard, harassment and losing their job—or, in the case of serious organised crime, possibly a much worse outcome. The office will enhance protections of those who whistleblow, while at the same time incentivising such disclosures by providing a safe space to share information.

There is evidence that an office for whistleblowers does incentivise disclosures. In 2020, the International Bar Association measured countries with whistleblowing legislation against a list of 20 best practices. The UK met just five of the 20. Meanwhile, the United States, where an Office of the Whistleblower sits within the Securities and Exchange Commission, met 16 of the best practices. That office received 12,300 disclosures in 2022, nearly double that of 2020, and, as its chief stated:

“The significant increase in the number of whistleblower tips and awards since the program’s inception shows that the program, with its enhanced confidentiality protections, is effectively incentivizing whistleblowers to make the often difficult decision to come forward with information”.

This is a cross-party, cross-departmental issue. Whistleblowers are to be thanked for, among many things, uncovering waste in our public services, highlighting poor or dangerous medical practices and conduct, and revealing the laundering, funnelling and theft of vast amounts of public and private money. When people steal from the public purse, it is society that suffers and our constituents who pay the price. According to law firm Pinsent Masons, His Majesty’s Revenue and Customs received nearly 14,000 tip-offs regarding misuse of the covid furlough scheme. In just one case, £27.4 million of taxpayer money had been falsely claimed by a fraudster who, despite never having been to the UK, registered four companies in London and claimed furlough for more than 2,700 non-existent employees. Some £26.5 million of public money was recovered as a result, in a case that also reinforces the importance of Companies House reform.

We have heard details of the Danske Bank money laundering scheme in previous debates, so I will not delve into the details again, but in that case we know that criminals took advantage of UK limited liability partnerships. That is why the reforms at Companies House and to limited partnerships are needed. However, once again, it was a whistleblower who brought that $230 billion economic crime to light, halting the stream of illegal Russian money laundering. Without him, it might never have been uncovered and might have continued for years.

That was before Putin’s illegal invasion of Ukraine, but we know that illicit finance helped to fund the war and will continue to fund it, unless it is stopped. I welcome the swift action the Government have taken to tackle the scourge of financial crime, first by passing the Economic Crime (Transparency and Enforcement) Act 2022, then by introducing the Bill we are debating today. However, while the Government have introduced measures that will go far in preventing economic crime, as it stands, neither piece of legislation supports those very people who are key to its detection.

Having spoken to many dozens of whistleblowers over the years, I know that someone who reports wrongdoing can risk jeopardising their reputation, their career, their mental health, their wellbeing and that of their family. It is not a decision made lightly. Whistle-blowers who expose economic crime must balance the risk to themselves in the name of doing what is right. That should not be the case.

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[Tom Tugendhat]

My right hon. and learned Friend is certainly more learned than me, and I will certainly be listening to his views. There are a number of areas that I am sure we will be able to discuss, and I am sure we will reach a conclusion that is acceptable to all sides.

[Dame Margaret Hodge]

I am grateful for the assurance that an amendment will be introduced in another place, but may I also have an assurance that it will cover both corporations and individual directors?

Economic Crime and Corporate Transparency Bill (Fifteenth sitting)

Baroness Hodge of Barking Excerpts

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[Stephen Kinnock]

Clause 147 raises a number of concerns for us, which I hope the Minister will be able to address. It aims to change the procedure for updating the Treasury’s list of countries designated as high risk due to serious deficiencies in their anti-money laundering and counter-terrorist financing systems, which was established by the Sanctions and Anti-Money Laundering Act 2018. The clause will enable the Treasury to update the list directly, without the need for regulations, in effect removing the opportunity for Parliament to scrutinise any changes to the list.

During the passage of the 2018 Act, there was cross-party consensus on the need for any UK list of designated high-risk countries to reflect international standards, primarily by mirroring the lists maintained by the Financial Action Task Force. The problem with clause 147 is that it appears to enable the Treasury to make any future updates to the UK list, even in ways that diverge from the FATF lists, without any opportunity for Parliament to scrutinise or debate the proposals. Given the zeal for deregulation that we have often seen from the current Government, it takes no great stretch of the imagination to foresee a situation in which the Treasury determines that the FATF lists are unduly stringent and that certain countries and territories should be removed from the UK’s list of high-risk countries, even in cases where issues identified by the FATF remain unresolved.

Looking at the relevant impact assessment, it seems that the intention is to enable Ministers to update the list “more swiftly” when needed, thus making the UK’s list more “responsive” to emerging developments than is possible under the current system. But even if the aim is reasonable, the methods are questionable. For one thing, the 2018 Act stipulates that regulations updating the list of high-risk countries are subject to the affirmative procedure, under which Parliament is given the opportunity to retrospectively review changes that have already been made by the time the regulations are published. Together with the fact that updates are generally needed no more frequently than once every three months, this does not seem to place an undue burden on Ministers.

The changes made by clause 147 do not seem proportionate to any identifiable problem with the current system. The Opposition therefore strongly encourage the Minister and his colleagues to revisit the clause, on the basis that a convincing case for the need to remove Parliament’s oversight of this process has not been made.

[Dame Margaret Hodge (Barking) (Lab)]

I concur entirely with the remarks by my hon. Friend the Member for Aberavon, but I want to ask a couple of questions.

First, the Minister will know that we are considering how we can move from freezing the assets of people who are sanctioned to seizing them. One of the ways in which that could be facilitated, from the advice I have received from various non-governmental organisations and lawyers, is to have a sort of kleptocrats list. I wonder if he would take that idea away and, in considering the request for greater parliamentary oversight, look at whether we could designate particular jurisdictions as kleptocracies. All the advice I get indicates that that would make it easier to do the seizing as well as freezing. Of course, in relation to Ukraine, that would mean that some of the £18 billion that has been seized from Russia could be recommissioned and used to help us rebuild Ukraine.

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[Seema Malhotra]

I think that there was a slight misunderstanding, but we will move on.

Clause 158 confers on the Secretary of State a regulation-making power to make consequential amendments that arise from the Bill. I want to raise a general point: the Minister did speak to this, but perhaps he could say a little more about examples of where the Secretary of State might need to use the power. Perhaps it is written somewhere, but I am not fully clear whether any changes that come through secondary legislation to the Act itself—I think that is a Henry VIII power in this clause—would be taken through the affirmative procedure.

It has been a general theme of debate though our proceedings that we need to make sure that there is sufficient provision for the transparency, scrutiny and accountability of changes, as well as for accountability of the Secretary of State’s use of powers for the reporting that there should be on how well the provisions are working. The power to make consequential amendments comes at the end of the Bill in clause 158, but it is a Henry VIII power that means that amendments to primary legislation can be made. That is different from the power to make regulations under secondary legislation, which we have been debating.

The Government have said that the power is needed to ensure that other provisions on the statute book properly reflect and refer to provisions in the Bill once it is enacted. I want to be clear about what the scope of the use of this power would be, how it is intended and how it would be reported on. Would an affirmative or negative procedure be used to make any changes under this clause?

[Dame Margaret Hodge]

We have raised a number of amendments to the Bill during the course of consideration in Committee, many of which I consider to be technical and things that would improve the processes. All those amendments so far have been rejected. I wonder whether, rather than bringing us back at a later stage as the clause proposes, the Minister would undertake, together with his ministerial colleague, to look again at some of those amendments, which are really just practical, pragmatic amendments, with a view to bringing them back. Would he bring them back on Report?

[Tom Tugendhat]

I will answer the second question first, if I may. I am absolutely certain that my hon. Friend the Member for Thirsk and Malton and I will look with great interest at the suggestions that the right hon. Lady has made. As she knows, we share many similar ambitions. We will have a look at those suggestions with officials. Certainly, there are some that we think could improve the Bill—I do not think there is any great debate about that—and I will make sure that we keep her informed. Her contribution and help, not just today and on the Bill, have been enormous, and I pay enormous tribute to the work that she has done over many years in fighting money laundering and different forms of economic crime.

On this specific power, the hon. Member for Feltham and Heston raises a very important point, which is that the clause does give large consequential provision to the Government to change aspects of the Bill. I understand the concerns that she raises. The nature of the Bill, however, is that it has quite a consequential impact on other elements of legislation, as she herself has highlighted. Therefore there are knock-on elements that will no doubt require minor redrafting and changes at various different points as the Bill goes into law. I am afraid that is slightly the nature of these operations, as she understands extremely well. That is what this power is for.

It is worth saying that any significant or substantial changes that really do change the intent of the Bill should be brought back in primary legislation, because this is clearly a provision in order to enable the Bill to operate, not to change the intent that this House gives it.

Economic Crime and Corporate Transparency Bill (Third sitting)

Baroness Hodge of Barking Excerpts

Committee stage
Thursday 27th October 2022 Public Bill Committees

[The Chair]

I am very sorry, but we are going to have to move on to other Members. I will come back if there is time at the end for further questions.

[Dame Margaret Hodge (Barking) (Lab)]

Q I hope the Committee will look at our amendments on information sharing, the funding of enforcement agencies, shareholder information, Companies House checks and AML supervision; we tabled them in a spirit of improving the situation. I agree with all that.

I am going to ask about another issue, just to get it on the table. People engaged in the debate over dirty money are very anxious that we should move from just freezing the assets, particularly of the Russian Government and Russian oligarchs, to seizing the money so that we can use it—particularly for the reconstruction of Ukraine, when that war comes to an end. Can I have your views on that, starting with you, Duncan?

One final thing: a big thank you to both of you for the work your organisations do in exposing a lot of the problems and for the very positive attitude you have taken to establish solutions. Thank you to both of you, individually and to your organisations.

[Tom Tugendhat]

Hear, hear!

Duncan Hames: Thank you. I think it is important that we should continue to respect the rule of law and have a judicial basis for asset recovery. Too often, it is tempting to have a more administrative approach, and with that comes risks. It is very important that, as well as having the clarity of purpose to designate a whole substantial raft of individuals and entities for Russia sanctions, we have the determination to make those sanctions work.

We published some research just last month that found hundreds of millions of pounds’ worth of UK real estate that we were fairly sure was owned and controlled by individual entities that have been named under Russia sanctions. However, if you check on the Land Registry, there are not any of the typical markers to say that you cannot sell or transfer or trade this property. That is partly because of some of the very clever and complicated arrangements for their ownership, including using trusts.

In the work you are doing on the Bill, there is an opportunity to ensure that really important measures for global security, such as our Russian sanctions, actually work, bite and make it impossible for those who have moved large amounts of wealth out of Russia to continue to control it in the interests of their political sponsors.

Helena Wood: I could not agree more that we need to start moving from freeze to seize, but I echo Duncan’s sentiments that we must do so in a way that protects the very things we are trying to protect and do: the rule of law, due process and democracy. We should not push towards measures that effectively put in place a ministerial decree for confiscating individual assets and run roughshod over A1P1 principles.

That said, there is further we could go in UK legislation. Even with the advent of the much vaunted unexplained wealth order, our law enforcement agencies remain on the back foot. There is more we can do within the confines of European rights compliance-tested laws of reverse burden mechanisms to put law enforcement on the front foot.

Fundamentally, though, it is not going to be an easy fight to link those assets back to the criminality from which they once derived, given the difficulties of gaining evidence across borders. However, there are models we could replicate that have been tested for ECHR compliance, such as in Italy and Switzerland—I could name others. If the Committee will forgive me for trailing some forthcoming RUSI work, a paper is coming in November or December this year that sets out some recommendations of where part 5 of the Proceeds of Crime Act 2002 could replicate some of the principles of other regimes and push forward to at least put law enforcement on the front foot.

The other issue I would point to, which has already been partly legislated for, is cost protection for our law enforcement agencies. We have legislated for cost capping in cases involving UWOs, but they are not the right tool to use in all cases; I particularly point to the oligarchs, who do not fit under the definition of PEPs in UWO legislation. There is an argument for the Bill to potentially push for full cost capping of part 5 cases to increase the risk appetite of our law enforcement agencies to take those cases on in the first place.

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[James Daly]

Q The reason I ask is that the example was given on Tuesday of a chip shop in Barnsley—great town that it is—has 50 legal entities registered to it. There are thousands of examples all over the country. It would take one investigator months to investigate the information for every separate legal structure attached to that chip shop. What do you feel about that, Ms Berry?

Elspeth Berry: There will always be a problem, but that does not mean we should not tackle it and it does not mean that we cannot tackle it, and I appreciate that the Bill is attempting to tackle it. All of the things it is trying to do are good, but almost all of them could be significantly improved. We have to deter the wrongdoers. We have to stop looking as though this is a good jurisdiction to do this in. For example, there have been arguments about the fees. It is generally accepted that they should go up, and if your business plan cannot cope with £100 or £500, what kind of businesses are being set up here?

If we are not checking the identity of shareholders and applying PSC legislation to partners, there are still so many loopholes. It is not that there is something there that would be a sanction if they ever caught you—we know this from police and crime; if people think there is only a vanishingly small chance of anyone ever noticing, it is worth taking the risk. I suppose that brings us back to the point about the registrar’s powers, which are great, but they are not duties in most cases. How will we know if she has done it, or what she can reasonably do to minimise the risks of various things—to check information?

One of the things we need is a clear database of things that are red flags—things that Transparency International and lots of journalists have identified that the registrar should be looking for, some of which the legislation still allows, such as things like overseas registries and multiple formations, and the use of company service providers. The problems with those were talked about during the earlier session, and the Bill is not going to entirely resolve those, if at all. If we can tighten down on a lot of those, we will reduce—never eliminate, but reduce—the amount of wrongdoing that is here because of problems we have either created or left in our laws.

[Dame Margaret Hodge]

Q I very much take your point, and I hope some of the amendments we put in address what you said about wanting to tighten up on the proactive role of Companies House.

I wanted to ask about shareholders and then about the disappearance of limited companies if they dissolve. I agree that shareholder information is really important—Usmanov brought that home to me. When we sanctioned Usmanov, he just gave everything to one of his daughters or something—anyway, it disappeared into other people’s hands. Can you explain a little what we need to do on shareholder information? At the moment, there is a 25% shareholding barrier. Should that be reduced to 5% or 10%? That is my question.

Then, on limited partnerships disappearing, that was brought home to me very much as a result of the terrible incident in Lebanon—the explosion in Lebanon. It was found that a British-owned company was behind that, with a beneficial owner in Cyprus who happened to be a corporate service provider. It then turned out that it was a nasty situation where the actual owners were some Syrians, and the fertiliser was not going anywhere near Mozambique—which was where it was meant for—but was being used for barrel bombs to kill Syrian citizens. The moment that happened, they tried to dissolve the company and get it to disappear, and obviously in that area of wrongdoing, we need to hang on to any knowledge that we have.

This is for both of you: what amendments do you think are necessary to enable us to stop people dissolving companies and to force information out, so that where there has been that terrible terrorist wrongdoing, we can pursue the wrongdoers? That said, I take the view that a lot of what we are trying to do is prevent these things from happening in future.

Elspeth Berry: On the PSC point, a reduced percentage would be a vast improvement, but I think a zero percentage could be considered. You can have a lot of influence in all sorts of ways while not necessarily hitting those targets, because you are connected with somebody else in a way that we do not catch through the legislation. But I certainly think that a reduction would be a big improvement to try and catch more people who are de facto PSCs, but not in law.

On the limited partnerships point, there are a lot of things we could do. The Bill makes a start in doing those, but given that a lot of this started with the limited partnerships consultations, I am slightly concerned that they got put aside because it was a case of, “Here comes all the corporate stuff,” and that is where all the money and excitement is. There is this small area of limited partnerships where there is a strong lobby for those people dealing with limited partnerships for particular purposes—quite legitimately—who do not necessarily want this to be made too difficult, but we get things like the restrictions on corporate partners not being applied to LPs. I had to read the provisions several times. I dread explaining them to my students, because of the difficulty in trying to get at who owns limited partnerships and who is in control of what is going on in them.

That level of “corporate partner on corporate partner on corporate partner” exists, and we know it is a problem. It is going to continue, depending on what we do with LLPs, and it is a big problem that they are just not in the Bill at all. It is like, “Oh, well, we’ll just apply the legislation to them later,” but which bit of the legislation? The corporate bit? The partnership bit? LLPs have a history of having the bits they want—the nice bits of corporate law and the nice bits of partnership law. Things can get missed because we think, “We have done the big task with the Bill.” PSCs can be applied to partnerships; they haven’t been here, and there is an assertion that it is not possible legally, but as a lawyer I would say that that is not correct.

You even have a provision here saying that people who have been disqualified under the company directors disqualification legislation can still act as limited partners. Limited partners have a limited role by definition if they are behaving properly—of course, they may not be—but even if they are behaving properly, a limited role is not no role for someone who has actually been disqualified from acting as a company director.

Chris Taggart: To pick up on an earlier question, the best information sharing is going to be information sharing in public. A lot of the great work that was done on people after the invasion of Ukraine was done using public domain information. There is a risk to lying in public. The fact that criminals will lie is also an opportunity to catch them out, because it is quite hard to lie consistently.

We get people all the time saying, “We don’t want our information to be on OpenCorporates”—even though it has come directly from Companies House and other places—“I don’t want people to know that my last two companies went bust,” “I used to have a company running a brothel in Germany, and I don’t want my new employees to know that” or, “I don’t want people to know that I am running a company on the side or working for someone else.” There is a cross-over here with data usage. When something is in the public domain, it needs to be functionally public. “Functionally public” means that you can use it and reuse it, and have it as data so that you can combine it with other datasets.

The shareholding data is so important, not just in and of itself, but because it allows you to ask, “Wait a minute. How is that happening with that?” Having it as data allows you to do that programmatically so that you can see trends.

[Dame Margaret Hodge]

Q Would you go down to zero—all shareholding data?

Chris Taggart: Yes. With shareholders, we ultimately need to get to a statement of fact—an authoritative record—so that what Companies House says is actually what the courts agree are the shareholders, and people cannot say, “We will move the shares, and then we will tell Companies House,” or, “We forgot to tell Companies House.” That will take work and time. We can extend the verification provisions for directors and PSCs to shareholders, at least over a de minimis amount, but ultimately we need to make Companies House the authoritative record of shareholding, so you are only a shareholder if you are on Companies House.

Elspeth Berry: On your question about dissolution, for limited partnerships it is a different issue because they are not an entity and you can still go after the partners, but of course that is why corporate partners are such a problem. Entities were a problem in Scotland some years ago. I am sure your Scottish colleagues can tell you more than I can about how that was dealt with after a fairly horrific criminal incident involving a lot of deaths. It was not possible to prosecute the partnership after it had dissolved. That is a problem with legal entity status, which is a whole big issue.

[Seema Malhotra]

Q I have a couple of specific questions. First, do you think there should be any sort of limit on the number of companies or partnerships registered at one address? Secondly, should there be any sort of limit—perhaps one beyond which there needs to be an application to increase, under specific criteria— on the number of directorships that any one director can hold?

Chris Taggart: On the latter question first, I have been a director for some 20 years. The first time, someone sat me down and said, “This is what’s involved in being a director.” You think, “Wow, that’s kind of scary.” You have a fiduciary duty and you have to understand the company. If you are a director of 200 companies, I fail to see how you can perform that fiduciary duty, or those companies are, in some ways, just legal entities for some conduits for something. They are not actually in business; they are just conduits. I struggle when someone is a director of 200 companies: either those are just legal entities for some purpose other than as a normal company or they are not doing their job. It seems to me obvious that there is a challenge there. Whether that is a limit or whether that is actually holding directors much more personally liable for the wrongdoing of the companies, I do not know, but I think that there is something. There seems to be a contradiction there, fundamentally.

Elspeth Berry: I agree. I would have supported a cap on the number of directorships for exactly those reasons, in that I do not think a director can fulfil their duties if they have a lot of companies. However, if you are not going to have that, that certainly has to be a red flag for Companies House. It has to be a thing they will investigate and that they have the resources to investigate, which comes back to the problems that we identified earlier.

On the addresses, if you have a company service provider giving their address, it is quite possible you will have multiples and that might be okay if that is their business, they are doing it properly, they are AML regulated and all the rest of it. The problem is that we have seen in recent years that they are not. Again, that ought to be a red flag. In the limited partnership proposals, where you are trying to establish some real connection, economic or otherwise, with a particular jurisdiction within the UK or, at least, with the UK, that is one of the problems. One of the options on the list—they are all problematic—I personally thought that the principal place of business might be quite a good one, showing an actual connection, but I have been corrected in my beliefs by my journalist colleagues who say that almost all the wrongdoers were able to tick that box. I think it is a problem if you are saying that as long as somebody will pick up the mail here, that is okay. Again, that needs to be a red flag.

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[The Chair]

Yes, if you could speak directly into your microphone, we would be very grateful.

[Dame Margaret Hodge]

Q Thank you, Graham, for all the work that you are doing. Even the suggestions you have made are very sensible. Obviously the data that is collected is important, but one of the ways in which we think we can tighten up the provisions a little bit is to increase the duties of Companies House to check. In a way, that is what you do. You go into these massive datasets and decide, “What the hell am I going to look at?” Can you give us some ideas as to how we could hone the measures to ensure that there is a red flag way—call it what you like—of going in and checking on everything?

Graham Barrow: Absolutely. What I am looking at is probably not even 5% of what I could look at in terms of suspicious activity and red flags. I have not the hours in the day; bear in mind that I do not get paid for any of this, so it is a labour of love, or whatever. There is a sensible answer, which is that we are now in a world where data is manipulated really easily and in bulk. Therefore, something that my company has done is to design algorithms that looks at clusters of red flags. If all we look at, Dame Margaret, is red flags, we are going to be overwhelmed. We have to accept that we cannot address every issue straightaway, which means that we need to look at clusters of red flags, which, taken together, can indicate significant organised crime or corruption that is being utilised through the formation of companies.

This year I have seen one organised crime group create about 1,500 companies, using data that they have stolen from two major global organisations. These are HR files, so the data is replete with all the personal information of those employees, who have then found themselves directors of companies that have been registered to empty shops, which have then been used to access banking, particularly overdrafts or other banking credit. There are about 1,500 companies, and the average overdraft might be £5,000 to £8,000; you do not need too many of them to be successful to understand that millions of pounds are being extorted or fraudulently obtained from banks through this ease of use.

Something else that is really important is the ID&V piece. If you have stolen ID&V data from, for example, a company’s HR files, the implementation of proof of life at the same time—that is, you do not just have the documents, but can prove it is you by having some form of selfie or other real-time interaction—is vital, because these people do not just set up companies; they open banking with them. Banks can be criticised, but they do an awful lot more due diligence than Companies House. If these people are opening bank accounts, the ID&V they currently have is clearly high quality. We must bear that in mind.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

Q A lot of the issues that the Bill rightly seeks to address are fairly high-level economic and corporate crimes, which are huge issues—and we are talking about huge amounts of money—but they do not directly have an impact on the vast majority of our constituents. One issue that does is phoenixing companies. Does the Bill do enough to address that type of issue?

Graham Barrow: Probably not. We have done some analysis of phoenix companies. For example, I think that something like 30,000 companies on Companies House have changed their name for fewer than seven days and then changed it back to its original name. That is a variety of phoenixing by which you disappear from your company name for a few days and then come back again. As you will probably know, Gavin, every year on Companies House there are thousands of proper phoenix companies—those that have dissolved and reopened, either geographically close or at the same address with virtually the same name. It is a real issue, and it is part of the whole broader issue of company name observations. There was a piece on “You and Yours” on Radio 4 a few weeks ago about a lady who had Asda Ltd registered to her terraced house in Huddersfield. She received 7 kg of post and all sorts of other things, and bailiffs turned up at her door.

The Bill does include the ability for Companies House to reject similar names, but if you have 3,000 companies a day—and that extends to companies across the world that may have similarities—I do not see how you are going to enforce that reasonably. There is just too much volume and too many potential comparative data points to compare them to. That is a huge issue, and one that inserting a little bit of friction between application and registration would help to address. At the moment, the focus is entirely on speed of getting on to the register. Putting in a bit of friction to do some proper checking would be a good idea.

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[Tom Tugendhat]

I should put on the record that he is a friend of mine as well.

[Dame Margaret Hodge]

Of lots of us around the table.

Graham Barrow: Shell companies are containers. Effectively, it is a container for assets. They are used in a whole variety of ways. They are used, clearly, as conduits for corrupt and criminal funds to be moved around the world. They are also used just as a container to access banking and do as I have just described—a one-off hit to get a bank account open and get an overdraft.

I have seen physical evidence of a company being incorporated to an address of somebody in Cardiff who knows nothing about it; on the same day, they open a bank account with one of our high street banks, and on the same day, they remove the automatic £8,000 overdraft that came with that bank account. Then they disappear, and of course it turns out that they were untraceable because none of the details they provided were real. That is a shell company, because that is not doing any normal commercial activity.

The Committee mentioned addresses earlier. I am sure some members of the Committee will know that there are addresses in central London that are home to 100,000 companies. That is clearly a matter of concern, particularly with the proportion of those companies that are registered from some of the more remote parts of the world—places you would struggle to find on a map—that concentrate at those addresses.

We need to be quite clear about the legitimate use of corporate service provider addresses. Some of our banks now provide that as a service. That is fine. There is one firm that offers this thing called a non-resident package, which should immediately make your ears prick up. Somebody from outside the country can register a business and be given the business bank account for a fixed fee. That bothers me hugely, because it makes me ask why.

The thing about shell companies is that they are not always easy to identify at the point of incorporation. We are getting very good at it, but it is still not an exact science. It is about lifetime analysis of a company’s behaviour, as well as some of the red flags that are raised at the point of incorporation.

[Tom Tugendhat]

Q Thank you very much indeed. The amount of data coming out suggests that this legislation may do something to inform people about things such as phoenixing, which you have mentioned. Clearly, there are many aspects to that and I am not going to pretend for a second that the Bill answers every single one—it does not—but it certainly goes some of the way towards ensuring that people can be better informed when they enter into future agreements. How would you say that the information alongside the verification assists you?

Graham Barrow: It probably does not assist me an awful lot, because I do not have access to a lot of the other data that particularly members of JMLIT, and other law enforcement and Government organisations, have access to. As a private citizen, I will not have access to that much more information. That is probably a good thing, because I am already drowning in information. For a man who is going to be 70 next birthday, it is not exactly the retirement that I had planned. In a way, I think the best thing I can do is help to inform and educate others so that as the Bill starts to generate that information, some of which I will not be privy to, I can at least help people to understand better how to analyse and aggregate that information to extract signals.

Ultimately, there will be too much information to do everything with, so it is about how we organise ourselves, particularly at the point of incorporation, so that instead of waiting for a problem and going back to see how it happened, we identify that problem in the process of being set up, and start proactively managing the people who are part of organised crime or corruption and are using or abusing Companies House to do that. We have never done that before, to the best of my knowledge, but we are now in a situation where we can start doing it.

[Dame Margaret Hodge]

Q I want to take you back to the work you did on Deutsche Bank. First, what additional powers did it lead you to think you needed? Secondly, how did the FCA respond—what was lacking or worked well there?

Graham Barrow: Dame Margaret, you ask me a tricky question because I worked at Deutsche Bank, and some of what I know is privileged and I cannot talk about it. In fact, my work in Deutsche Bank is what has led me to be sitting here, because it was while I was there working on the Russian mirror trades that I realised that two completely different firms had filed exactly the same set of accounts—identical accounts—signed by the same person. My rather naive reaction then was, “How on earth did this happen?” I know better now. That person’s name is in the public domain: it is Ali Moulaye. He is a dentist who currently lives in Belgium and has been written about frequently. I kind of discovered him, in a way. He has signed more than 10,000 sets of accounts on Companies House on behalf of at least 2,500 limited liability partnerships, a significant proportion of which have, sadly, been named as being involved in various laundromats.

One issue was that all those accounts were filed on paper and were then scanned in as an image, not as a machine-readable document. That is a really big disadvantage, because it prevents people such as me, or those with access to clever technology, from reading those documents into artificial intelligence engines and performing deeper analysis on them. It is a very difficult problem. It would be a wonderful thing—although I suspect quite labour intensive—to retrospectively digitise all those old PDFs, because there is a huge wealth of intelligence still residing in them that we truly do not understand. That is also very much true of limited partnerships, which still can only file on paper. The only way to incorporate a limited partnership is on a paper application. That makes reading the data on those registration forms extremely difficult, which is why lots of it has remained hidden for so long.

[The Chair]

If there are no further questions from Members, I thank the witness; Graham, thank you very much for your time.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Baroness Hodge of Barking Excerpts

Thursday 27th October 2022 Public Bill Committees

[James Daly]

That is very helpful. Thank you.

[Dame Margaret Hodge (Barking) (Lab)]

Q ICAEW represents what proportion of the accountancy profession, do you reckon?

Angela Foyle: I do not know the proportion, but there are about a hundred and something thousand members.

Mike Miller: Yes, about 110,000 members. I am not sure of the proportion.

[Dame Margaret Hodge]

Q You do not know the proportion, but the truth is that there will be people who are financial advisers and accountants who are not members. You have a policing role, but if they are not your members, they are not policed.

Angela Foyle: Not by the ICAEW, but there are other institutes out there.

[Dame Margaret Hodge]

Q Yes, but you are the big one.

Angela Foyle: We are the bigger one, but they may be by someone else. There are also people who are not regulated by any professional body who can call themselves accountants as well.

[Dame Margaret Hodge]

Q Quite. We know that most accountants are brilliant people who make sure we do not make mistakes when we fill in our tax return and all that sort of stuff. However, we know from all the leaks that there are a lot of bad apples in the accountancy world.

There are two things I wanted to ask. One is about the current system of regulation. You as professionals play a role in the system. What changes would you make to ensure the current regulation encompasses all those who call themselves financial advisers or accountants? Secondly, how good are you at your policing role? You obviously have a lobbying role and looking at both your CVs, you are on the lobbying side to make sure regulation fits what your profession wants. I am much more concerned about the policing role. Can you tell me how many people in the last year have been suspended, or whatever it is you do to them, if they have been found guilty of engaging in, facilitating or colluding with economic crime or money laundering or anything like that?

Angela Foyle: I do not think we have the numbers for the people this year.

Mike Miller: We do not have the numbers up to date for this year.

[Dame Margaret Hodge]

Q I had them, but unfortunately I have lost them. I think it is about 10 or 15.

[The Chair]

I am going to have to curb this and move on very briefly to Tom because we have to finish.

--- Later in debate ---

[The Chair]

Thank you very much. That will be put on the record.

[Dame Margaret Hodge]

Can I ask something wicked? Can the witnesses provide written answers to my questions?

[The Chair]

They can indeed.

Mike Miller: I am very happy to.

Angela Foyle: Could we possibly have your question in writing, just to remind us?

--- Later in debate ---

[James Daly]

Q So such a process—light-touch regulation at its finest—is certainly open to fraudulent activities.

Peter Swabey: I think it is fair to say that at the moment it is nothing like as secure as any of us would like it to be, and the Bill is a big step forward in tightening that up. I would still like to see it go further in some ways.

[Dame Margaret Hodge]

Q It is the beneficial ownership that is revealed to Companies House, not necessarily even all the directors, as I understand it. The way you are talking, you obviously deal with big companies. The whole purpose, which I think we all share across the room, is that we want SMEs and the growth of new companies. The idea that every SME will have a company secretary is not really a viable alternative. That means it is really important that we can have faith in the company service providers, who are the people who check the data. Given the way the Bill is constructed, do you think you would have such faith, in particular given all we know from the Panama leaks onwards?

Peter Swabey: It is really important to make sure that the hoops through which those authorised company service providers go before they become authorised are significant, to make sure that we can have confidence in that.

[Dame Margaret Hodge]

Q What would that entail?

Peter Swabey: That would entail detailed verification of who people were, of who the ownership was and how that was structured and, effectively, Companies House having a bar to doing that. Where I would take issue slightly with the premise of your question is when you talked about SMEs not needing or not having space for a company secretary; most of them have an accountant and all sorts of other things. It does not have to be a full-time role; someone can be doing it part time, but what is important is that someone who knows what they are doing is looking after those issues.

[Dame Margaret Hodge]

Q Do you know how company service providers are regulated and supervised?

Peter Swabey: No, it is not something that our members—

[Dame Margaret Hodge]

Q They are supposedly regulated and supervised by HMRC. Previous witnesses talked about OPBAS, which in its most recent report said that 81% of those supervisory bodies did not have a proper risk-based approach to ensure that those people were lawyers, accountants, bankers or whatever, that they were legitimate people not colluding in or facilitating economic crime. What do you have to say about all that? Basically, supervision is in a mess. HMRC does nothing to supervise company service providers. What is your view on that?

Peter Swabey: I cannot help you much with that, because we are not a supervisory body in that sense.

[Dame Margaret Hodge]

Q You give advice on what makes good supervision.

Peter Swabey: We give advice on what is good governance for organisations, not on the supervisory role.

[Liam Byrne]

Q I want to pursue that point for a moment. In the interests of good governance, would it not make sense to strengthen some of the obligations on directors to include, for example, a duty to take steps to prevent corruption in their organisations? We have similar measures on corruption; we do not have similar measures on economic crime and fraud.

Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.

--- Later in debate ---

[Liam Byrne]

Q I do not know whether you can see it, but the Bill is called the Economic Crime and Corporate Transparency Bill. How credible do you think corporate transparency in this country will be if we do not amend the Bill to include the protection of journalists like you, who have worked so hard and bravely to reveal the truth only to face legal action in English courts that sought to silence you?

Catherine Belton: I think it will be half-baked if it does not include that amendment. Obviously, it is great to have better laws, but when financial watchdogs, public oversight bodies and journalists are still unable to cast a light on some of the financial transactions of the super-rich, from fear of these crushing lawsuits, it means that you have a system that is only half working. Law enforcement relies, and has relied in the past, to a great degree on journalistic investigations, including for instance by the OCCRP; its reporting has led to some very important cases.

[Dame Margaret Hodge]

Q I will ask one question, Catherine, because many have been asked. I join with others who have met you, or read your book, and are full of admiration for your courage. For those who have not, and do not know your story, will you quickly tell us what happened to you in relation to the SLAPPs, and why it is important that we try to tackle those in the Bill? You can do it very briefly; I am conscious of time.

Catherine Belton: I wrote a book called “Putin’s People”, which was about Putin’s rise to power, the continued role of the KGB and how Russia was using oligarchs—Russian businessmen—to further Russian influence in the world. I was writing precisely about how many of the oligarchs, such as Roman Abramovich, were essentially forced to act as arms of the Kremlin, because otherwise their wealth could be jeopardised. Putin’s hold on power was such that anybody who did not obey his orders could face jail or the seizure of their companies.

Abramovich was very upset when I suggested in the book, quoting three former associates, that he had acquired Chelsea football club on Putin’s orders, in order to acquire soft power and influence in the UK. That, I believe, was public interest reporting. The allegation had been put to his spokesperson, and the response was in the book. He announced that he was suing me personally and HarperCollins—a statement that was swiftly followed by lawsuits from three other Russian billionaires, and then one from the Kremlin oil company Rosneft. The cases were very difficult to grapple with, because there were so many of them all at the same time.

[Dame Margaret Hodge]

Q How many were there altogether?

Catherine Belton: Five cases. It cost my publisher £1.5 million to deal with the cases, and they got only to the preliminary hearing stage before they were either settled or withdrawn. Rosneft’s case had to be withdrawn completely because there was no basis for any of its claims. The judge found that one of Abramovich’s claims was completely exaggerated, which allowed us to make minor amendments and avoid the enormous cost of having to continue to fight. Even though we believed that we had a very strong public interest case, our lawyers told us that it would have cost, at a minimum, £2.5 million to continue to defend the great deal of reporting that had gone into my book. It would have taken over a year. Abramovich had twice filed the exact same claim simultaneously in Australia as well, even though he had no business there, and therefore no reputation to protect.

Nineteen media rights organisations said that the cases against “Putin’s People” and my publisher, HarperCollins, bore all the hallmarks of a SLAPP case—that is, they were designed to intimidate the publisher, and they were abuse of process, particularly in the case of Abramovich.

Yes, the judge found that one of his claims was exaggerated, which, according to the Ministry of Justice’s proposal for the anti-SLAPP law, is one of the criteria under which SLAPP cases should be thrown out of court at an early stage. It introduced three criteria. One was that meanings were being inflated or exaggerated by a claimant; that was clearly the case for most of the oligarchs pursuing me. In Rosneft’s case, the judge found that what I had written about Rosneft, the Kremlin oil company, was not defamatory at all, yet my publisher had to spend hundreds of thousands of pounds just to get to the stage of a preliminary hearing, to get it thrown out of court. The proceedings demonstrated how many other UK media organisations had been censoring themselves because they did not want to deal with those enormously costly lawsuits—

[The Chair]

Catherine, I am really sorry, but I have two more people waiting to ask questions and there is only five minutes. I am so sorry to curtail you.

--- Later in debate ---

[James Daly]

Q Just in general, using the banks as an example, should we be looking to put in the Bill requirements for them to play their part in the partnership to tackle money laundering?

Professor Jason Sharman: Again, banks have had these requirements to establish the beneficial owners for a while. I think this is good, but it is the enforcement that is key there.

[Dame Margaret Hodge]

Q Following on from that, I completely take the point about enforcement, but would a failure to prevent power make any difference, assuming it was enforced?

Professor Jason Sharman: I probably differ from many of the other people who have spoken in that I am not a fan of failure to prevent. I think that the goal of these laws is to make life hard for bad people without making life hard for good people at the same time. To the extent that you have really onerous regulation or weaken the presumption of innocence, that is something of an own goal or collateral damage. Before you put people in jail, you should be pretty serious about it. There should be a mental intention there—a mens rea.

I am not really comfortable with the strict liability. There is strict liability in anti-bribery, which means I have to do pointless anti-bribery training every year for the University of Cambridge. It does not do me any good and it does not stop corruption, but it is one of the things that Cambridge feels it has to do because of the strict liability. Again, it is a cost to society that is not included in legislation or in regulatory impact assessments.

[Dame Margaret Hodge]

Q Because time is limited, I will not engage with that, but it is a really interesting view. I want to quote something to you that I think you said—apologies if I have got it wrong. You said:

“These host states now have a duty to block, trace, freeze, and seize these illicit funds and hand them back to the countries from which they were stolen.”

I do not know who you were referring to there, but, in our case, with the illicit Russian assets frozen in the UK, how do you suggest we seize those funds and how can we repurpose them?

Professor Jason Sharman: It depends. With the Russian assets that are criminal assets, eventually you need to go to a court of law to do that—

[Dame Margaret Hodge]

Q That is very hard—you know that.

Professor Jason Sharman: Indeed. That is hopefully something that the Bill will do something to correct. It may be different if you are talking about sanctions and the money that is currently frozen. It would depend. If we are talking about criminal money, there is an anti-money laundering process of confiscation—civil and criminal.

[Dame Margaret Hodge]

Q Sanctions.

Professor Jason Sharman: Sanctions. I think you cannot. There is proper process. As I understand it, unless there is a formal state of war that obtains between two states, on what basis are you going to take away—

[Dame Margaret Hodge]

Q That is the point. Did I quote you incorrectly, then?

Professor Jason Sharman: No, you quoted me correctly, but that is money that was stolen in one place and moved to another place, and you have to prove that it was stolen. That is different from saying, “You are a Russian oligarch and we are going to freeze your funds.” It is very different.

[Dame Margaret Hodge]

Q I accept it is different from a Russian oligarch, but according to Bill Browder we have something like £30 billion of Russian state assets sitting frozen at the moment. Of course, it needs to change. I totally accept that we are not at war with Russia, so those powers do not exist. Do you think it is appropriate to introduce any new powers that would enable us to seize as well as freeze those assets and then repurpose them for the reconstruction in Ukraine? There is certainly a desire across the political divide here in the UK to try to achieve something along those lines. Do you think that is possible?

Professor Jason Sharman: I would not shed a tear if Russian oligarchs lost their assets.

[Dame Margaret Hodge]

Q This is the state I am talking about.

Professor Jason Sharman: Okay, for the Russian state. In that case, I think that would be wonderful. I know Browder mentioned earlier central bank assets. But, again, there is a precedent here. To what extent would foreign Governments put money overseas? There is a lot of concentration on Russia as a corrupt regime, which I think it is, but it has plenty of company, many of which have assets in the UK.

[Dame Margaret Hodge]

Q The Italians appear to have conquered this—I do not know if you know about that—through the stuff they have done on the mafia. The Canadians appear to have introduced a new power that might take them there. The Americans are trying to think about it. The Europeans are. There is quite a lot of thinking. I am just picking your brain. Is there anything you have done in this field that could add value as we try to think about it?

Professor Jason Sharman: I think not, and I think that the British Government, at least when it comes to sanctioning oligarch assets, which I realise are different from state assets, are in a bind. I think they will have to return those assets to the oligarchs and that they may have to pay damages to the oligarchs. That would be a terrible injustice, but I really worry about what the end game for sanctions is.

[Liam Byrne]

Q Jason, you are a political scientist. Why are we in this position where we have such weakness? Why has our political system failed to address these weaknesses for so long?

Professor Jason Sharman: This is probably a typical social science answer, but there are quite a few reasons that make it difficult, because no one corrective, in and of itself, is going to fix the situation. There have been solutions, such as the persons of significant control registry, the unexplained wealth orders and so on, where it has been like, “This is the thing that will unlock the problem”. But instead it is a combination. First off, it is appropriately difficult to take away people’s property. Secondly, the bureaucratic incentives do not favour it. You have this very risk-averse culture within law enforcement agencies. Thirdly, as I said, there is a failure to harness the incredible investigative resources that lie outside the state, in the not-for-profit sector but also in the for-profit sector.

Economic Crime and Corporate Transparency Bill

Baroness Hodge of Barking Excerpts

2nd reading
Thursday 13th October 2022 Commons Chamber

[Suella Braverman]

I agree with my hon. Friend, who has a huge amount of expertise and has achieved a huge amount in Parliament to crack down on fraud and economic crime. I will come to the Bill’s anti-money laundering measures, so I will have to detain him a bit longer until I get there. I agree, however: we have to make sure that we can build on the regime, powers and law enforcement frameworks that are in place. We can go further.

[Dame Margaret Hodge (Barking) (Lab)]

If the Home Secretary does agree with what was said by the hon. Member for Thirsk and Malton (Kevin Hollinrake), with whom I have worked closely on these matters, why is she not reforming corporate criminal liability in the Bill to bring into effect the very change that he has promoted?

[Suella Braverman]

I accept what the right hon. Lady says, but the Government have already taken steps to establish the case for change on corporate criminal liability. In 2020, we commissioned the Law Commission to undertake a detailed review of how the legislative system could be improved to appropriately capture and punish criminal offences committed by corporations, with a particular focus on economic crime. The Law Commission published that paper on 10 June 2022. The Government are carefully assessing the options that were presented and are committed to working quickly to reform criminal corporate liability.

--- Later in debate ---

[Dame Margaret Hodge (Barking) (Lab)]

It is a pleasure to follow the hon. Member for Cheadle (Mary Robinson), who has been a passionate and strong advocate on behalf of whistleblowers and the very important part they play in fighting economic crime, money laundering and fraud.

Many of us have waited with eager anticipation for the Bill that the Government promised would enable us to rid Britain of the influence of oligarchs and kleptocrats and of the cancer of money laundering, fraud and other economic crime. That is particularly true of the large and ever growing group of Back Benchers who are working together across the House on these issues. Although we all welcome the fact that the Bill is now before us, many of us deeply regret that, yet again, the Government have failed to demonstrate the strategic vision, determination and ambition that are plainly needed if we are to translate our shared aim into reality on the ground and convert our warm words on economic crime into real action. The Bill contains good and important changes, but it does not allow us to make the big leap forward that we need to systematically drive this pernicious and pervasive illegal activity out of our economy and our society.

Let me remind Members why tackling economic crime really matters. Bluntly, the cost to the UK economy is immense. People have talked about the figure of £290 billion a year, but a recent study by the University of Portsmouth gives us a figure just short of £350 billion. The mind boggles. That is somewhere between a quarter and a third of total public spending every year. It is the enormity of the sums that gives the UK the shameful and dubious distinction of being the jurisdiction of choice for oligarchs, kleptocrats and criminals around the world—people who choose us to hide and launder their ill-gotten gains.

Governments of both the main political parties have long championed the UK's financial services, and the success of our financial services has contributed significantly to economic growth over recent decades. We boast of our professionals, our institutions, a trusted legal jurisdiction, the English language, an attractive property market and the lure of London as a place in which to live and work—all things that help to create a vibrant financial services sector. At the same time, though, our weak regulations, our woefully inadequate enforcement capability, our relationship with the UK tax havens in the Crown dependencies and overseas territories, our lack of transparency and our deficient accountability protocols have meant that it has become all too easy to wash the dirty money along with the clean here in Britain.

The human impact of this is beyond awful. We have all seen the horrific, heartbreaking images of Putin’s vicious assault on Ukraine and the effect that it is having on innocent Ukrainians. However, we must face up to the understanding that the dirty cash is laundered and cleaned by Putin and his kleptocratic friends both in and through the UK. Ukraine is now paying the price for corruption and economic crime. We are helping to enable Putin’s assault. Our corporate structures, our lawyers, bankers, company service providers and accountants, and our links with places such as the British Virgin Islands all facilitate the accumulation of stolen wealth and power that helps to fuel the criminal onslaught on an independent nation and its people.

We have allowed that to happen. It is an utterly appalling truth that, since Putin came to power more than 20 years ago, there has not been one single prosecution for economic crime launched against any individual Russian oligarch—not one. Similarly, the explosion of fraud in Britain has led to endless instances of misery and harm, which other Members have cited. The authorities, as my right hon. Friend the shadow Home Secretary said, reported 5.1 million incidents of fraud in the year to September 2021, and we know that much fraud remains unreported. The published figure means that at least one in 11 adults were the victim of fraud in that year. People such as Len, who, at the age of 96 and with a proud record of service in the Army and a successful career as a chartered surveyor, was getting 600 scam communications a month. Although he did not keep track of his total losses, he knew that in one 10-day period he had spent and lost £600. It is the lack of enforcement action that contributed to Len’s misery and that has allowed fraud to spiral into the most common crime in Britain today.

The Government are absolutely right to bring forward legislation. In fact, I would argue that if we do not eradicate money laundering, fraud and other economic crime we will cause lasting damage to our financial services sector, because we will lose our reputation as a trusted jurisdiction, and the plentiful supply of clean money across the world will go to other more reputable countries. We will lose business, not attract it. Britain can never enjoy sustained economic growth on the back of dirty money.

I welcome the good and important changes the Bill will bring about when it is passed into law. The reform of Companies House, which other hon. Members have talked about, is warmly welcomed and hugely important. None of us wants more regulation, but we do need much smarter regulation, and that is what these provisions aim to achieve. We need to tackle and stop scandals such as the Danske Bank scandal, where an Estonian branch of the Danish bank allowed $8.3 billion of suspect payments to move through the bank using British registered companies. Many of those companies were limited liability companies, and we now know that 90% of the more than 800 limited liability companies involved in the scandal were set up by one rogue company service provider and registered at the same address in Birmingham. We need to stop the practices that meant that in the FinCEN files leaks 3,267 UK shell companies were named—more than in any other country. We need to tackle the reasons that led to Transparency International’s finding in a 2017 investigation that 766 UK shell companies were involved in corruption and money laundering cases worth up to £80 billion, with half of those 766 companies registered at just eight different addresses.

[Kevin Hollinrake]

The right hon. Lady is making a fantastic speech, and it is always a pleasure to listen to her and to work so closely with her from our respective positions on the Back Benches. She refers to Danske Bank; the total amount of money laundering through that Estonian branch was €200 billion, much of it Russian money from kleptocrats moving the money out of Russia. The bank has not been fined yet. It will probably get a fine of £2 billion or £3 billion, but the likelihood is that not a single individual will be held to account. That is absolutely wrong. Fines are seen as a cost of doing business. I know she agrees that we need to extend the failure to prevent an offence to include economic crime and things such as false accounting, and we must have individual directorial responsibility.

[Dame Margaret Hodge]

Hear, hear! I completely concur with the hon. Gentleman, and it is a real pleasure to work with him on all these matters. He is completely right. The interesting thing about Danske Bank is that, were there to be any prosecutions, they would not happen in the UK. They might happen in other jurisdictions, particularly America, but they will never happen in the UK because of the weakness of our enforcement agencies.

The provisions in the Bill are essential to help tackle some of the wrongs in the examples I have given, but I hope the Minister will assure the House when he winds up the debate that he will seriously consider amendments that we intend to table to strengthen the reform of Companies House and prevent potential loopholes. I also welcome the proposals to allow organisations such as banks to share information where that could help to prevent or detect wrongdoing, and the proposals to treat cryptoassets just like cash or any other assets for the purposes of seizure and enforcement.

However, the Bill too often tinkers with the challenges at the margin instead of boldly adopting a more holistic and systemic approach to bearing down on dirty money. For example, instead of proper and much-needed reform of the supervision of the professional enablers who are responsible for implementing anti-money laundering regulations, we get new cost caps for the Solicitors Regulatory Authority and new powers for the Legal Services Board—piecemeal reform, not systemic reform.

Instead of reforming the present outdated criminal offences in relation to the responsibilities of companies and their directors to prevent economic crime, which the hon. Member for Thirsk and Malton (Kevin Hollinrake) referred to, so that we can really hold those who enable, facilitate or collude with economic crime to account, we get new pre-investigation powers for the Serious Fraud Office—important, but piecemeal reform. Instead of a systemic reform of the broken suspicious activity reports regime, we tinker at the edges by reforming part of the regime, the defence against money laundering SARs—again necessary, but yet another example of the piecemeal approach being taken.

Not only does the Bill tinker at the edges; it also fails to address key matters that are all vital to a comprehensive approach to preventing, detecting and punishing money launderers and fraudsters. Where are the proposals to seize, as well as freeze, the assets taken from sanctioned individuals and states? We want the money that Putin and his kleptocratic cronies stole from Russia to be used to fund the reconstruction of Ukraine. We need similar powers to those that already exist in other European countries such as Italy and in nations across the world such as Canada.

Where are the proposals for a sustainable funding regime for the enforcement agencies, so that they can use the powers they have? For instance, as the hon. Member for Glasgow Central (Alison Thewliss) stated, the cost of registering a new company with Companies House is a mere £12. It would still be a bargain at £50 or £100, with the extra income ringfenced to fund Companies House properly.

Where are the proposals to do away with the requirement that our enforcement agencies pick up the tab for the legal costs incurred by individuals who succeed in resisting a prosecution for economic crime? The US enforcement agencies, which are far more successful in securing convictions, do not have to pay the costs of the person prosecuted if they lose a case. We should follow that example. Our system acts as a brake on our enforcement agencies. They fear the financial costs of losing, so they fail to prosecute aggressively, and because of that fraudsters, criminals and money launderers get away with awful actions.

Where are the proposals, which the hon. Member for Cheadle called for in her contribution, to protect the brave whistleblowers on whom we are so dependent? Where are the proposals to ensure accountability to Parliament and the public, so that we can see whether our reforms deliver? Where are the proposals to tackle the abuse of our defamation laws by oligarchs who want to silence those of us wanting to hold them to account? Where are the proposals to close the loopholes on transparency for trusts and the ownership of land, which continue to act as secret ways to launder money into or through the UK? Where are the reforms to the SARs regime, to the supervision of AML supervision or to corporate criminal liability laws?

In the wake of the 7/7 attack in Britain, we treated the reform of counter-terrorism as a mission requiring strong and comprehensive action, and we are now rightly proud of our capabilities in that area. The war in Ukraine should be our 7/7 moment in the battle to eradicate dirty money. It has helped us to understand the horrors that allowing illicit finance to infect our financial services sector, our economy and our society can bring, both at home and abroad.

This Bill is a once-in-a-generation opportunity to put things right. We cannot and must not waste it. I look forward to working with my colleagues across the House and with Ministers in Government to achieve our shared and crucial objective: to show that we are a country that consistently demonstrates zero tolerance for all illicit finance and is determined to grow a strong, trusted financial services sector in a jurisdiction that boasts the smartest regulation, first-class enforcement of the rules, maximum transparency and strong accountability. There lies the way to economic growth.

Economic Crime: Law Enforcement

Baroness Hodge of Barking Excerpts

Thursday 7th July 2022 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

It is a bizarre day to be debating a really important issue. I am grateful to the Backbench Business Committee for selecting it, and it is a privilege to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake), with whom I am working closely on many of these issues. I will say something a bit general before moving on. Have I got 10 minutes, Mr Deputy Speaker, or a little bit more?

[Mr Deputy Speaker]

You are not constrained. All I would say is to focus—

[Dame Margaret Hodge]

I will keep it tight.

It is shocking but true that it was the tragedy of the war in Ukraine that got our Government to start thinking about the serious threat that the country faces, in both our economy and our society, from the spiralling menace of illicit finance and all that goes with it. I have said many times in the House, and I repeat today, that we will never enjoy sustained, good economic prosperity on the back of dirty money. We earned the reputation on which our superb, successful financial sector was built by being a trusted jurisdiction, and we must maintain that. Today, we are in danger of losing that trust.

The US sees us as a high-risk jurisdiction similar to Cyprus, and Londongrad is becoming a popular term among many. We have moved off our perch as the world’s leaders in fighting economic crime. Moody’s has downgraded us, and we are slipping down the ranks of Transparency International’s corruption perception index. Everything is moving in the wrong direction. That is no surprise because, as the hon. Member said, economic crime is now massive. It costs the country £290 billion annually—more than a quarter of the Government’s total public expenditure—and all of us who are concerned with this area know that that figure is conservative. The latest figures from UK Finance that came out last week suggest that in 2020 there was an 8% increase in fraud, which of course is the biggest component of economic crime.

Much illicit finance, but not all, comes from Russia, through Russian companies and Russian individuals. As various Select Committee reports on the subject show, for too long we have turned a blind eye to the threat that Putin’s kleptocratic regime poses to our economy. Why did we do nothing after the assassination of Alexander Litvinenko in 2006, or after the poisoning of Sergei Skripal in 2018? Those were two brutal attacks on British soil.

We must add to that the findings of a recent report by Buzzfeed News investigations, which established that between 2003 and 2016, there were 14 more suspicious deaths in the UK of individuals who were hostile to the Russian state. I will mention just three of them. Stephen Curtis, the British lawyer who helped the laundering of money—potentially billions of pounds—in the UK for wealthy Russian oligarchs, died in a helicopter crash in 2004. Alexander Perepilichnyy blew the whistle on a multimillion-pound Government fraud in Russia. He flew to Britain, and died of a so-called heart attack when jogging near his home in Surrey in 2012. The coroner’s inquest said that he died of natural causes, but evidence given, I gather, behind closed doors for national security reasons said that there was no natural cause determined. Some suspect that he was poisoned. Boris Berezovsky, who made his wealth during the collapse of the Soviet Union, was famous because he was key in supporting Putin and getting him into power in Russia. In 2013, he was found hanged in his home.

Those are only three of 14 cases, but in all of them the police concluded that the deaths were not suspicious. There was no investigation, or indeed any suggestion that those were Russian state-sanctioned murders, although the US intelligence services told our police that they thought the deaths were likely sanctioned by the Kremlin. Were the police just incompetent? I doubt it. Was there pressure from somewhere else—from either our security services or our Government—to turn a blind eye to the possibility that those were state-sanctioned murders? American intelligence officials told Buzzfeed journalists that Russian killers had been able to kill in Britain with impunity. They said that one of the reasons for the reticence of enforcement agencies to act was

“a desire to preserve the billions of pounds of Russian money that pour into British banks and properties each year.”

As we debate the failures of our enforcement agencies in tackling illicit wealth, we should bear in mind that the problem goes well beyond the funding, the skills and the effectiveness of the enforcement agency. If we are really to eradicate dirty money, we require action on a wide number of fronts, as the all-party parliamentary group for fair business banking and the all-party parliamentary group on anti-corruption and responsible tax have said. We have put together a good manifesto that could form the start of concerted action to rid us of this terribly bad thing. We talk in the manifesto about action on four fronts. We need smart regulation, much greater transparency, proper accountability and enforcement. We are debating enforcement today.

All those measures are interdependent, and I worry a lot that the Government’s response through the economic crime Bill, which should be with us in the autumn, will be too little and too fragmented. Reform of Companies House, for which we have argued for a long time, is necessary but not sufficient. So are reform of anti-money laundering regulations, and an open register of property owned by foreign countries. We need co-ordinated action on many fronts if we are to clean up dirty Britain.

Today, we are focusing on enforcement. Our performance is abysmal, our record in successfully bringing bad players to account is miserable and our commitment to doing the job properly is questionable. The evidence—the hon. Member already talked about some of it—is overwhelming. The Bribery Act was introduced in 2010, and in the UK we have had 99 criminal convictions and six deferred prosecution agreements. The USA, with a similar legislative framework, has had 236 convictions in the same period. As I understand it—I could not find one, but if I am wrong, I stand to be corrected—we have never pursued a criminal prosecution against a bank for money laundering or sanctions busting. We use civil measures, but never criminal ones. In 2019, we had civil fines of £260 million. In the same year, the Americans pursued criminal action against and secured £2.5 billion from just six banks, and they secured £5 billion in civil fines.

As the hon. Member said—it is worth repeating, because it is so shocking—the Financial Conduct Authority fined HSBC £64 million in 2021 for AML failures, but nearly a decade before, it was fined £1.4 billion in America for AML offences. Standard Chartered is a British bank, so we ought to be the ones who are really responsible for ensuring that it behaves itself. What do we get from it? Fines for wrongdoing under anti-money laundering regulations of £102 million. What do the Americans get? Over 800% more: £842 million. Yet we know from the FinCEN—the Financial Crimes Enforcement Network—files that too many of our banks and too many individuals who work in our banks either passively collude with economic crime, or actively promote and facilitate money launderings. The banks that are implicated are so often the biggest British-based banks: HSBC, Barclays, Standard Chartered.

What we do in Britain is pursue the little businesses, the little men and women who are trying hard to establish new businesses here. That came home to me very much when I chaired the Public Accounts Committee and we had the leaks relating to HSBC—they were called the Falciani leaks. There were more documents relating to British accounts than, I think, for any other nation. There were 3,600 British accounts. At the time, the tax authorities said to us that there was cause for concern with about a third of those. Out of that third—about 1,200—they finally found 150 cases. How many did they pursue? One individual was charged. I could not find, in my search of Google, whether that individual was ever convicted. Look at how other countries dealt with it: every other country managed to charge more people, fine more people and get some compensation. The only thing that happened with us was that Rona Fairhead, now in the House of Lords, was on the board of HSBC at the time and was responsible for the audit committee. I cannot understand how anybody with that responsibility could not have seen a red flag when looking through the accounts from the Swiss branch of HSBC and seeing the profits being secured. The only thing she said was that she declared that the whistleblower was a criminal and that the only thing that HSBC should do was pursue the whistleblower and try to get him imprisoned.

Fraud is the crime that now affects one in 11 adults in the UK, yet convictions for fraud have collapsed by two-thirds in the past three years—cases up and convictions down. The number of criminal cases the Serious Fraud Office, in which we had great confidence, has under investigation has halved over the past three years. There have been some disastrous failures in the courts through the SFO with Serco and Unaoil, where it lost cases simply because it did not share information in a proper way—it failed to disclose relevant material to the defendants. There are lawyers in the Chamber. I am not one, but I cannot believe that it actually did that.

[Andy Slaughter (Hammersmith) (Lab)]

My right hon. Friend is making an excellent analysis of the situation. At the moment, the SFO is itself being investigated by a former Director of Public Prosecutions and being sued by the people it should be investigating. It lacks the money, the personnel and the powers to do its job. It has a £53 million a year budget against hundreds of billions of dirty money. This is a peashooter against an elephant, is it not? This needs reform urgently.

[Dame Margaret Hodge]

I completely agree with those observations, which are so well made.

The National Crime Agency has dropped its prosecutions by 35% in the past five years. The record of Her Majesty’s Revenue and Customs, which we do not often talk about, is equally awful. It sees its purpose entirely as simply getting tax revenues in. That is important, but it also has a duty to ensure that anybody who acts unlawfully in the way that they deal with the revenue authorities—or, more seriously, evade tax—is pursued. Yet it simply does not see that as part of its functions. Compare that to the Department for Work and Pensions, where anybody who has an allegation of fraudulently claiming benefit is pursued with vigour by the authorities in that agency. A similar attitude should be taken to what I consider the serious crime of deliberately avoiding tax and not paying into the common pot for the common good.

There are some egregious cases of schemes dreamt up with no purpose other than to avoid tax. One example was Working Wheels, which hit my desk when I was Chair of the Public Accounts Committee. In that instance, the person who wanted to avoid tax pretended that they were selling second-hand cars. That created money that then whirled through the system to create a debt, which they were able to claim against the tax liability from their legitimate earnings. Chris Moyles was persuaded that he could become a second-hand car dealer. Telling people that you are a second-hand car dealer is fraudulent. It is a fraud. And why that is not pursued with the same vigour as somebody who tries to lie about their circumstances to get a better benefit settlement is beyond belief. One of our recommendations is that HMRC should have an absolute statutory duty to pursue wrongdoing with the same vigour with which it pursues getting money into our coffers.

All the agencies are grossly underfunded. The Government trumpet the £100 million they will get from the economic crime levy, but that is peanuts when set alongside what the banks themselves spend on anti-money laundering and what other countries spend. Under Biden, the Americans have increased their expenditure on enforcement by more than 30%, because they define it as a security issue. What have we done here? We have had a real cut of 4.5%.

We have lots of ideas that would not require a call on taxpayers’ money. We could enable a percentage of the fines collected from successful actions to be used to fund further activity and staffing within the enforcement agency. We could follow the American example and say that costs incurred by the defendant, were we to lose cases, should in no way be met from the public purse. Why should people against whom we allege wrongdoing in relation to Government funding be allowed such a contribution? One thing we will come back to is the sanctioning of individuals. We have frozen the assets of a lot of Russian oligarchs, but we have no mechanism to seize those assets. A move from freezing to seizing—we are doing some work next week to look at the practical changes that would have to be brought in to enable that to happen—would release more resources not just for enforcement activity but, in this instance, to help with the reconstruction of Ukraine after the war.

Staffing must grow. For example, there are only 118 employees to deal with more than half a million suspicious activity reports a year that the agencies receive. By my arithmetic, that is 4,250 reports per official. In Germany, there are 500 reports per official. In Australia, there are 1,400 reports per official. They are all better staffed than we are here. This is so much an invest-to-save activity. It is a nonsense that the Government do not distribute their resources in a way that enables that to happen.

There is also the chaos of our existing regulatory infrastructure, which is fragmented. As the hon. Member for Thirsk and Malton said, lots of stuff falls through the holes. A lot of whistleblowers and people come to me with cases, and I refer a case to one agency, which tells me to refer it to another, and it then disappears and I never hear about it again.

We must take on board the failure of the professionals to self-regulate. There are too many bodies; 13 bodies supervise the accountancy sector. The hon. Member and I met representatives of one of those the other day. I think that they have suspended seven people in the past year. That is a nonsensical figure in relation to the activity that is taking place—the collusion and facilitation of wrongdoing—so we have to sort out the regulation of the enablers and the regulator. There is an overarching regulator, which regulates all the regulators. That should be sorted out and personal responsibility must be taken.

I will make two other points. The most egregious case that I have come across—this is a comment on all our regulatory systems and our failure to enforce—relates to Lebanon, where there was a tragic explosion in a warehouse that had fertiliser, which was supposed to go to Mozambique. That resulted in hundreds of deaths, thousands of injuries and massive damage to property. A few weeks after that occurred, I got a phone call from a Reuters journalist with whom I regularly work. He told me that the company that owned the fertiliser was British-registered. I gave my usual comment about “hopeless, lax regulation” and did not think twice about it. About three weeks after that, I got a number of phone calls from people in Lebanon, the Lebanese Bar Association and others. It emerged that the company had been set up here as a UK-based company by a woman in Cyprus who was in fact the company service provider. She put herself down as the beneficial owner, but she obviously was not. She told HMRC that it was a dormant company, but it obviously was not because it was dealing in fertiliser. It then emerged that the real owners were Russian-Syrians and that the fertiliser was going nowhere near Mozambique, but to Assad to be used in barrel bombs to kill his people. That is a shocking story, but it demonstrates how our regulatory infrastructure and the failure of our enforcement agencies damages the lives of people not just here at home but abroad.

I have a final story, which, again, causes me great concern. After the Kazakhstan tragedy—a demonstration against the kleptocrats who run the regime where Russian soldiers were used to fire at the crowds and people were killed—two British academics came to me with their research, which demonstrated that there were 30 individuals in Kazakhstan who were involved in money laundering and human rights abuses and whom we should sanction. I used the privilege of the House to mention the 30 individuals in an Adjournment debate and then sent the list to the Foreign Office. A few days after that, I got a letter from one of the people I had named, asserting his innocence. Obviously, he wanted me to respond outside the House, so I acknowledged the letter and did nothing more. I then got a second letter with a phone call, asking whether we had received the letter. My assistant said that we had. I then got a letter from the desk at the Foreign Office asking me whether we had received the letter, whether we were responding and what we were going to do about it. I asked the Foreign Office why it was pursuing this and on whose behalf it was working. It said that it thought that it was important to facilitate relations between kleptocrats and British politicians.

That is shocking and leads me to think: are the Government really serious about bearing down on all the economic crime and corruption that week after week, year after year, we talk about in the House? If they are, they must pursue consistently and vigorously every instance of it, and not just the Russian kleptocrats—evil though they are—but kleptocrats elsewhere who are stealing from and killing their people and creating instability in the world.

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[The Parliamentary Under-Secretary of State for the Home Department (Kevin Foster)]

This is certainly an interesting day to be responding to a debate. As is the case with the shadow Minister, this is not my usual field, but I agreed to respond to this debate about a week ago. [Interruption.] It is always nice to have those comments from the Deputy Leader of the Labour party. It is always a pleasure when she joins us.

I thank my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and the right hon. Member for Barking (Dame Margaret Hodge) for securing this debate, and all the other Members who have contributed. It was good to have the rare chance of hearing from my good friend, the hon. Member for Strangford (Jim Shannon).

We all agree that economic crime poses a threat to the integrity of our economy, and to the security and prosperity of the UK and our allies. Let us not forget the innocent victims who suffer both emotionally and financially at the hands of unscrupulous fraudsters. Economic crime, as outlined by many who contributed, affects more UK citizens more often than any other crime type, and we have heard many examples of that today.

The UK has one of the world’s largest and most open economies, and London is one of the world’s most attractive destinations for overseas investors. Those factors make the UK attractive for legitimate business and contribute to our prosperity, but the Government accept that they also expose the UK to the risk of money laundering via some of those processes.

The public/private economic crime plan published in 2019 provided impetus and direction for our collective efforts in this area, including strengthening law enforcement and increasing domestic and international co-operation. There has been progress in tackling the threat. For example, in recent years we have built some key capabilities, including the creation of the National Economic Crime Centre and substantial reform of the suspicious activity reports regime.

As a number of hon. Members touched on during the debate, we have enacted the Economic Crime (Transparency and Enforcement) Act 2022, introducing reforms to enable law enforcement to take more effective action against kleptocrats who launder their funds in the UK. We have also legislated for a levy on the anti-money laundering regulated sector, which from next year will raise £100 million a year to help us to combat economic crime.

I hear some of the concerns expressed by colleagues about the potentially fragmented nature of the enforcement landscape, yet I would emphasise that that does not mean there is not joint and co-ordinated working between the law enforcement agencies concerned. The ever-evolving and clandestine nature of economic crime requires a multi-agency response, drawing together the relevant expertise, capability and resources to effectively tackle this challenge head-on.

The Government believe that the National Economic Crime Centre plays a leading role in setting strategic priorities for the enforcement response to economic crime and bringing agencies together. The NECC leads intensification campaigns to prevent, prepare for and protect against economic crime and to pursue those responsible for it. Co-ordinated by the NECC, the joint money laundering intelligence taskforce serves as a world-leading model of best practice, enabling tactical and strategic intelligence sharing between the public and private sectors to better tackle economic crime and support high-priority operations. However, we recognise the need to go further, as many hon. Members have set out.

[Dame Margaret Hodge]

I note the Minister’s theoretical description of what happens, but the practice, for anybody who puts any allegation that we get from whistleblowers into the system, is that it just gets passed from one agency to another and it then falls down a black hole and we never hear about it again. While theoretically co-operation and co-ordination take place, in practice they do not. The other thing I would say is that, if in practice the system is working so brilliantly, why are prosecutions and convictions down by so much when we know economic crime is going in the opposite direction?

[Kevin Foster]

We would accept there is a need to go further and certainly, following today’s debate, we look forward to the debates we will have on the forthcoming Bill. From what we have heard today, I think Members across the House will have thoughts, opinions and valuable contributions to make on how we can strengthen our regime, in both its legal construction and its direct impact.

We recognised in the 2021 spending review the need to invest in this area. The economic crime levy, combined with public contributions, is now an overall package of £400 million to tackle economic crime over the next three years. In the wake of Russia’s invasion of Ukraine, the National Crime Agency established a new combating kleptocracy cell specifically to combat corrupt elites, their dirty money and those who enable them to abuse our financial system. We also recognise that we need to further empower law enforcement through the forthcoming economic crime and corporate transparency Bill, which will be designed to tackle economic crime and protect our national security while supporting enterprise. The Bill will include much-needed reforms to Companies House and limited partnerships, with additional powers to seize suspect crypto assets more quickly.

Preventing Crime and Delivering Justice

Baroness Hodge of Barking Excerpts

Wednesday 11th May 2022 Commons Chamber

[Priti Patel]

I will give way shortly.

While the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) voted repeatedly against boosting police funding, we have given the police the investment they need. An increase of £1.1 billion has taken the spending to nearly £17 billion a year.

[Dame Margaret Hodge (Barking) (Lab)]

I am very grateful to the Home Secretary for giving way. I want to engage not in the to and fro on which she started her contribution, but on a subject where I think there is unity across the House, which is in the fight against economic crime. Does she agree that if we are to be effective in fighting economic crime, we must have measures that introduce better transparency, that properly fund our enforcement agencies, because, at the moment, they are not fit for purpose, and that also hold to account the enablers of economic crime for the actions that they take?

[Priti Patel]

The right hon. Lady is absolutely right. I will come onto the forthcoming economic crime Bill, which speaks very specifically not just about how we do better and more, but how we target our resources to stamp out fraud and go after the permissive environment and the individuals who occupy that space and commit the most appalling economic crimes.

Since I became Home Secretary, an additional 13,500 police officers have been recruited. We are well on the way to our target of 20,000 more police officers by next March. Following the incredible response to our public consultation—

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[Yvette Cooper]

My hon. Friend makes an important point. I pay tribute to police officers across the country who are working incredibly hard in our communities to try to crack down on and prevent crime. They walk towards danger when the rest of us walk away. They are valiantly trying to hold things together, but too often, they are let down by the Government, particularly when dealing with violence against women and rape. The rape charge rate has gone down from 8.5% in 2015 to a truly shocking 1.3%. Today, in England and Wales, an estimated 300 women will be raped. About 170 of those cases will be reported to the police, but only three are likely to make it to a court of law, never mind the jail cell. Just think what that means.

That applies not just to rape, but to many other crimes. No charge are made within a year of the offence being committed in 93% of reported robberies, 95% of violent offences, 96% of thefts, 97% of sexual offences, over 98% of reported rapes and over 99% of frauds. It is a total disgrace. As one police officer said to me, “This is awful—it feels like once serious offences are effectively being decriminalised”, because there are no consequences.

[Dame Margaret Hodge]

My right hon. Friend is making a very powerful speech. I want to move on beyond the police to the issues she has raised about fraud. Fraud is now the biggest crime facing us, and the cost to the economy is coming on for something like £190 billion a year. Does she agree with me that, as well as funding the police, it is absolutely imperative that we fund all the enforcement agencies fighting this sort of economic crime? While the Americans are raising the amount of money spent on this, we are lowering our investment into the enforcement agencies.

Economic Crime (Transparency and Enforcement) Bill

Baroness Hodge of Barking Excerpts

2nd reading
Monday 7th March 2022 Commons Chamber

[Priti Patel]

I wholeheartedly agree with my right hon. Friend on that. We could do a rerun of exactly what happened back in 2018, but, in the interests of time, we want to crack on with where we are going with this Bill. It will enable the greatest changes to the companies register since it was established nearly 200 years ago. Companies House will be reformed and we will verify the identity of every company director and beneficial owner. I know that Members of this House have been calling for that for a considerable time. No criminal or kleptocrat will be able to hide behind a UK shell company ever again—those infamous brass plates will go. This will be a boost to all legitimate businesses in the UK and, importantly, it will make it easier for them to get the information they need.

The next Bill will bring forward reforms to prevent the abuse of limited partnerships; new powers to seize crypto-assets from criminals—that is a new and emerging area where we have so much more to do; and measures to give businesses more confidence to share information on suspected money laundering. It will be a very substantial piece of legislation. I assure the House that we are already drafting that legislation and it will be brought forward as soon as we are able to do so and we can get the time in the House. Today’s Bill and our commitment to a second Bill will show that in this Government, we are all acting collectively and unitedly to root out the dirty money in our economy and, importantly, to hobble Putin and his cronies.

[Dame Margaret Hodge (Barking) (Lab)]

I welcome the indications that the Home Secretary has given of what will be in the Bill that will arrive, I hope, early in the next Session, but will she also consider the role of the enablers—lawyers, accountants, banks and others—who either condone or themselves facilitate much of the money laundering and financial crime?

[Priti Patel]

I agree with the right hon. Lady, and I am also grateful to other Members who have not just highlighted this issue but given specific examples. A great deal of work is being done. It is important that we take a collective approach institutionally, and that our legal basis is sound and solid.

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[Dame Margaret Hodge (Barking) (Lab)]

I will try to keep my remarks short. Like others in the House, I welcome the Bill, but it should never have taken the nightmare of a war in Ukraine for us to act and to halt the avalanche of dirty money that has been allowed to enter Britain today. We are the jurisdiction of choice for not just Russian oligarchs, but kleptocrats, money launderers, people traffickers, smugglers, terrorists and other villains. That is the result of the failure of this Government and previous Governments to act. The Labour Government also had some responsibility for this, but the inaction over the last decade or so is down to this Government and the previous Conservative Governments.

As every other hon. Member has said, the Bill has to be the first step. I look forward to a further Bill coming forward swiftly at the beginning of the next Session so that we can enact other important measures. The other point that other hon. Members have made is that the Bill is not something great or inventive. It was first promised to us by David Cameron; I think that was in 2015, although others think it was 2016. There was then a massive consultation, pre-legislative scrutiny and a Bill in 2018. It was in the Queen’s Speech in 2019 and reinforced in the G7 summit in Cornwall, and then we heard that there was not going to be an economic crime Bill. It was all gone, and then war came in Ukraine and suddenly it has re-emerged.

The implications of the Bill go well beyond Ukraine, although the Bill is vital as we try to put pressure on Putin and his utterly dishonourable gang of cronies, and to de-escalate the conflict through economic sanctions. We need to move faster and go further. Some very important amendments have been tabled; I will not use my time on them now, because hon. Members will want to talk about them in Committee, but they include freezing an oligarch’s assets while lawyers consider the case for sanctions, and ensuring appropriate funding so that we do not just put something into law without using it to go after the oligarchs properly.

[Mr Baron]

Is the right hon. Lady as concerned as I am that some estimates put the cost to this country of economic crime at nearly £300 billion, yet we spend something like only £850 million on all the nationwide enforcement agencies? Other countries spend a lot more and seem to have a higher prosecution success rate. Is that a coincidence?

[Dame Margaret Hodge]

No, of course not; I completely concur. The latest figure I have seen for the cost of economic crime to the economy is £260 billion, so the Government must provide tougher regulations, more effective enforcement, proper resourcing and clear accountability—those are the key things we need.

I thank the Government for listening to our representations. Even the Bill before the House includes some very welcome changes, such as tougher penalties and greater accountability, with an annual report to Parliament—I remember arguing that case as the legislation went through, and it being resisted. The Government’s new clauses will speed up the processes, and I hope that in Committee there will be further improvements.

When the Minister winds up, will he say whether he has looked at amendment 3, which stands in my name and that of other hon. Members? It would address the loophole that I think the hon. Member for Bromley and Chislehurst (Sir Robert Neill) mentioned; I think it is a drafting mistake, but it looks as if individuals could escape the transparency that the Bill intends by using nominee directors and corporate trust providers. We have received legal advice, a copy of which I have shared with the security Minister; I wonder whether the Minister answering this debate has looked at it and whether he will respond on the drafting issue.

This is not an economic crime Bill; it is important legislation that should have been put in place years ago. The economic crime Bill is still desperately needed and I look forward to urgent discussion of it. In the meantime, I hope we will have time for the proper consideration of our amendments.

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[Paul Scully]

Before giving way further, I want to acknowledge that I am very aware of the strength of feeling that corrupt people must not be allowed to set up ways to escape the transparency this register will bring. I can therefore see merit in requiring all who are selling property to submit a declaration of their details at the point of the transfer of land title during that transition period. That would mean we would give anyone selling a zero-day transition period; that goes further than the 28 days, but it is an acknowledgement of the work done across this Chamber, in particular with the help of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). They would have to register ownership if selling, and in that way we would either get their ownership details, or if they did not sell, we would get it at the end of the transition period in a way that still protects legitimate owners. We will give this further consideration ahead of finalising the Bill in the Lords next week, because it is not right for British businesses to bear the brunt of Her Majesty’s Government’s pursuit of the Russian cronies.

[Dame Margaret Hodge]

I am interested in where the Minister has got his information from, because I have not seen that data. I understand about the Hollywood stars and those people who do not want their ownership of property to be revealed, but my understanding from both Transparency International and Global Witness is that most properties are bought through shell companies—often located in the British Virgin Islands—probably as a mechanism for laundering money. I wonder where he gets his data. Some of the British companies that choose that structure do so to avoid stamp duty, and the House does not want to endorse that, either, does it?

[Paul Scully]

No, indeed. If the right hon. Lady looks at the Panama papers, I think she will see that they cite Emma Watson as having bought a house under a shell company owing to security risks, and the Pandora papers cite a former Prime Minister of this country buying a house in Harcourt Street and ultimately saving £300,000 in stamp duty. We clearly should not support that. So we have to get the balance right. There will be legitimate reasons, and there will be people avoiding tax, which we want to stamp out, but, in repurposing these measures, we want first to ensure that we are stamping out oligarchs’ money.