Economic Crime and Corporate Transparency Bill

Debate between Baroness Hodge of Barking and Catherine West

Report stage
Tuesday 24th January 2023 Commons Chamber

[Catherine West]

My right hon. Friend is making an excellent speech. Does she agree that the US model is worth looking at? Law enforcement agencies that are successful get a percentage of the proceeds of their success back to recycle to employ more people to do more enforcement. It is a virtuous circle, whereas our rather hands-off approach is perhaps less effective.

[Dame Margaret Hodge]

My hon. Friend is absolutely right and I will refer to that a little later in my contribution.

There is another report on HMRC’s supervision of company service providers. It looked at 672 of the company service providers and only 95—14%—were found to be compliant with checking that AML regulations were enforced by their members. More than half—352—were non-compliant, but only a third of those 352 were ever deemed to be non-compliant and were pursued through the courts; they received an average fine of £8,000.

This litany of ills demonstrates why we need to sort out the supervision of company service providers before we enact the legislation, and that is why our amendments in the name of the hon. Member for Barrow and Furness are so important. We need to be certain that the company service providers have been properly checked and supervised before we let them loose on verifying data for the new register.

The Treasury is already reviewing the supervision mechanism. I saw just recently that consultation on that review will start in the second quarter of 2023. What I am saying to the Minister is: where there is a political will, there is a political way. There is absolutely no reason why the review should not be completed and implemented concurrently with implementation of the legislation contained in the Bill. By putting that in the Bill, we would make certain—with my greatest love for every civil servant in the country—that that gets enacted. If we do not do that, we will end up with another dud register. We are giving him and the Government a pragmatic and practical suggestion that will simply make the Bill work as it is intended.

Economic Crime

Debate between Baroness Hodge of Barking and Catherine West

Thursday 2nd December 2021 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I beg to move,

That this House recognises the devastating impact economic crime has on individuals, businesses, families and society; considers it unacceptable that the cost of money laundering alone exceeds £100 billion a year according to the National Crime Agency; is concerned that in the wake of the Pandora Papers leak there is inadequate transparency, regulation and resources in place to effectively tackle this severe problem; and calls on the Government to bring forward legislative proposals to tackle economic crime as a matter of priority, integral to which are provisions to introduce a criminal offence for failure to prevent economic crime, reform Companies House and introduce a beneficial ownership register for the overseas owners of UK property.

I am grateful to the Backbench Business Committee for selecting the motion for debate. I am also grateful to all those who supported the application, and I particularly thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for working with me on it. The reason why we have secured such wide support for our debate is the growing recognition, concern and understanding of the enormous problems we are facing as a result of economic crime.

The Government produced an economic crime plan in 2019, but as the period it covers comes to an end next year, I think we should all reflect that that plan has not resulted in a successful crackdown on economic crime, but instead we have witnessed frightening and real growth in such crime. Far from bearing down on such wrongdoing, we have seen it mushroom across our economy, infecting our society, our security and our public sphere.

[Catherine West (Hornsey and Wood Green) (Lab)]

I put on record my tribute to my right hon. Friend for her work yesterday on the Finance (No. 2) Bill, dealing not just with the bigger subject, but with the detail of the Bill’s clauses. Does she agree with that, although it is our economy, in a globalised environment we should worry about economies abroad, including the Russian influence? I refer specifically to the recommendations of the Russia report, which deal with a number of financial instruments.

[Dame Margaret Hodge]

One of my growing concerns is that economic crime and the laundering of money into the country—particularly, one suspects, of a lot of Russian money that has probably been stolen from the Russian people—is having an influence right through society, and I will reflect on that later in my contribution.

--- Later in debate ---

[Dame Margaret Hodge]

Again, I am pleased to see such unity across the Chamber today. I completely agree that if it is not made a criminal offence and there is no direct liability on the individuals concerned, it simply becomes a business cost and will not change the behaviour or conduct of those big corporations. I concur with the hon. Gentleman.

I was going to use the example, although I probably do not need to, of the Serious Fraud Office’s failure to successfully prosecute the Barclays bank case. As many observed at the time, that case showed that under our existing law the bank could not be held accountable for the actions of its employees, and the chief executive could not be held to account for the actions of the bank. Nobody could be held to account. These reforms would change that by introducing a vicarious liability condition and bringing in a “failure to prevent” clause. The Americans do it; they have much tougher laws that hit the corporations with criminal, civil and regulatory penalties, and they secure many more resources.

Our second ask is about starting the work to strengthen our enforcement by reforming Companies House. Creating a public register of beneficial ownership was an important move when David Cameron was our Prime Minister, and a huge step forward. In one year, the register was accessed more than 2 billion times, but the data, as we all know, is often inaccurate or incomplete. Global Witness did an analysis in 2018 that showed that 10,000 companies declare a foreign company—mostly linked to a secrecy jurisdiction—as the owner of the company, 335,000 companies had no beneficial owner and 9,000 companies were controlled by beneficial owners who each controlled more than 100 companies, so they were nominee beneficial owners.

It takes £12 to set up a company—it is ridiculous. That is why so many UK companies keep appearing in all the leaks we get of wrongdoing. Our lax enforcement leads to tragedies worldwide, and we need to do something about that. That is why these reforms could be funded by raising the fee. If we quadrupled the fee and charged 50 quid to start a company, we would raise a huge amount of money that we could put into reforming Companies House and ensuring that it had unique identifiers for the beneficial owners, and powers to investigate and interrogate.

My third proposal, which I will deal with very quickly, concerns the introduction of a property register. Buying a property through a shell company registered in the British Virgin Islands is the easiest way to launder money into the UK. There are very few good reasons for maintaining anonymity, but plenty of bad ones: not just money laundering, but avoiding stamp duty, inheritance tax and other taxes.

It is difficult to put a number on that, although many people have tried, but I will share one fact with the House. All London boroughs have had an increase in their electoral register over recent times; the only borough that has not is the Royal Borough of Kensington and Chelsea, the reason being that such a large number of properties there are bought through shell companies by foreign owners that there are fewer residents there today than there were 10 years ago.

[Catherine West]

Does my right hon. Friend agree that that distortion of the London housing market is to the detriment of all our constituents? I note there are other hon. Members present who represent London seats. Across the UK, but particularly in London, where we see such extreme homelessness and overcrowding of children, that really needs to be addressed.

[Dame Margaret Hodge]

Absolutely. That is another really important point; hiking up the prices at the top of the market obviously has an impact right through the housing market here in London. Some terrible instances have been uncovered in the various leaks. The Crown Estate, for example, sold 120 of its properties to companies registered in 14 different tax jurisdictions, demonstrating again the way in which the system is abused. Those are people such as Vladimir Chernukhin, who owns a residence in Regent’s Park through a company registered in the British Virgin Islands, or James Ibori, a Nigerian governor who was prosecuted here for fraud and money laundering, and who had property in Hampstead and Dorset. In the recent Pandora Papers, the Crown Estate bought a £67 million property from the Aliyev family, who are the well-documented abusers of their rule in Azerbaijan.

In 2015 we were promised a register of beneficial ownership for properties owned abroad. There was a consultation in 2016 and a draft Bill in 2018. It was mentioned in the Queen’s Speech in 2019, and again in the G7 meeting in Cornwall in 2021, but we still have not got a Bill, although it is my understanding that such a Bill has been written and is literally gathering dust on the shelf. The problem is enormous, and if we fail to act robustly it will overwhelm us. Economic crime is costing us our international reputation as a trusted and respected jurisdiction. If that trust goes, our ability to develop and grow our economy will be fatally curtailed.