Economic Crime (Transparency and Enforcement) Bill

Alison Thewliss Excerpts

Committee stage
Monday 7th March 2022 Commons Chamber

[Sir Iain Duncan Smith]

I am grateful.

Let me end by saying to my hon. Friend that this legislation is probably one of those great critical junctures at which we finally decide and agree in this place, as a result of an emergency that is going on elsewhere, that our procedures and our laws are wrong, and that we have to make change. When we have to make change, we should not baulk at it; we should make wholesale change, and ensure that what we deliver leaves the next generation clear about where they will be, and clear about the fact that we did not fail them. I therefore ask my hon. Friend to stick to his agreement with us, and when the Bill comes back, we will look to it. Otherwise we will have to amend the Bill, but I take my hon. Friend at his word.

[Alison Thewliss (Glasgow Central) (SNP)]

I want to speak about the amendments and new clauses in my name and those of my colleagues. I refer to amendment 41, new clauses 4 and 21 to 23, and amendments 18 to 23 and 40. I have indicated my support for a number of other new clauses and amendments. I dare say that given the cross-party nature of the amendments that were tabled over the weekend, if we had had more time we would have had more names attached to all of them. The Minister would do well to listen to the cross-party calls from Members of both Houses. I have little in common with the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), and I disagree with him vehemently on many issues, but I have signed some of his amendments.

I share the horror felt by my colleagues and my constituents at the news that is coming through from Ukraine. We condemn the flagrant and repeated breaches of the Geneva conventions by Putin and his troops. I thank the people of Glasgow Central who have been raising funds and gathering goods across the constituency, but particularly those at the Hindu mandir, dropping off those goods to help the people fleeing Ukraine. Their sense of humanity has been undoubted, and I hope that it will be met by Ministers—not least the Home Secretary, who disappeared before we could raise further issues with her—because the people of Ukraine deserve our support.

This Bill is patently not enough. The volume of worthy and sensible amendments, and indeed the Government’s own amendments, testify to that. Action is long overdue. Stephen Gethins, Professor of International Relations at St Andrews and our former colleague in the House, has said:

“For years we have turned a blind eye to Putin's dirty money, propaganda and influence in our democracy. Those who called out the corruption were badged as anti-Russian when it was the Russians who were Putin’s first victims. It is a shame that many are only paying attention to his crimes after such grave events. I hope that real action will be taken. After years of inaction we owe the people of Ukraine and Putin’s other victims at least that.”

I agree very much with Stephen Gethins.

The situation we find ourselves in today, legislating in great haste, did not need to happen. This is not new. Putin and his cronies have been shifting their ill-gotten gains through the UK for many years now, unimpeded—and indeed facilitated—by UK Governments of various stripes, while journalists, civil society campaigners and, to their credit, many Members across this House, such as the right hon. Members for Barking (Dame Margaret Hodge) and for Sutton Coldfield (Mr Mitchell), have repeated their calls for action throughout many Bills.

--- Later in debate ---

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. There are far too many private conversations taking place, and I am finding it difficult to hear the hon. Lady.

[Alison Thewliss]

Thank you, Mr Deputy Speaker. I was talking about people buying their seats at party fundraisers and at the heart of British democracy. That is something that this House should reflect on. This place needs to take a long hard look at itself and at what it has facilitated, allowed and ignored over the course of many years.

We in the SNP welcome this Bill—how could we not?—but we would argue that it is long overdue and does not go nearly far enough. The UK Government’s inaction and prevarication have given the oligarchs a head start to shift their assets, to lawyer up, to step down from companies and boards and to saunter unimpeded to their getaway yachts and go to places that will still have them. Co-ordinated and quick global action, including in the overseas territories, could have made this more difficult, as would action on crypto-assets. The recent Treasury Committee report highlighted the growing role of crypto-assets in economic crime.

We support Labour’s calls to cut the registration of overseas entities to four weeks. We all agree that 18 months was ludicrous, but six months still gives people far too long to shift their ill-gotten gains. I would be grateful if Ministers confirmed what they are doing to monitor asset flight, and if they could provide an estimate of how much money has already left. Our amendments 18 to 23 would lower the threshold for beneficial ownership from 25% to 10%. Evidence already points to the threshold being gamed and to people appointing family members and those they can easily control, and the Government need to be aware of that and do more to prevent it.

[Anthony Mangnall]

I apologise for interrupting the hon. Lady, who is making a brilliant speech. On her point about assets being handed over, where they are being hidden and the chain involved in these activities, does she agree that insurance companies need to be brought into these measures? Insurance companies have a list of every single asset and item in the name of these individuals, yet over the weekend there were reports that insurance companies were seeing people coming off their lists because they were already moving their assets out.

[Alison Thewliss]

The hon. Gentleman makes an excellent point, and I hope the Minister was listening carefully. We need to use all the levers at our disposal to trace where these assets are going, who is moving them and who is helping them to do that.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

I am pleased to see the amendments that would lower the threshold to 10%. In the prelegislative scrutiny of the Registration of Overseas Entities Bill, the Government indicated that they were willing to lower that threshold through secondary legislation. Has the hon. Lady received word from the Government that they will now honour that promise that they made to us only a few years ago?

[Alison Thewliss]

I have not received that assurance from the Minister, but I would be glad to do so. The hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle) and I served on that Bill Committee together, and a lot of the evidence that was given at the time still stands today. Many of the things we were warned about, such as shifting things into trusts, have happened, and the Government need to act on the warnings that they were given.

Turning to schedule 4, the register proposed in the Bill is not as transparent as the Scottish register, which will come into force on 1 April. Transparency International and the Chartered Institute of Taxation have said that the UK Government could learn from Scotland on this. As I say, Scotland’s register of persons holding a controlled interest in land in Scotland goes live on 1 April, and I would like to thank Jennifer Henderson, the Keeper of the Registers of Scotland, and her team of experts for taking the time to meet me last week to discuss this.

Transparency International has warned that this Government’s proposed register could not be as transparent as Scotland’s because the legislation as drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity that in turn owns the property. Scotland’s register notes, per piece of land, who the beneficial owner of the land is. For example, it notes which companies have land registered to them, and who has significant control of those companies. I am sure that I could draw a diagram that would explain this better than my description, but my understanding is that if a holding company has five or six different pieces of land for three oligarchs, the Scottish register would show which oligarch each piece of land belonged to, but that the register as laid out in this Bill would not. I ask the UK Government to consider taking a lesson from Scotland, to speak to Registers of Scotland and to review changes such as this, so that we can properly understand who owns what.

The Chartered Institute of Taxation said that

“if the government’s aim is a public register of ownership of land it does not achieve this”.

It also said:

“The UK Government may also want to look at the Scottish approach which is to reveal the person who has ‘significant influence or control’ over the owner or long-lease tenant of land and property in Scotland.”

According to the Scottish Government, this means that

“it will be possible to look behind every category of entity in Scotland, including overseas entities and trusts, to see who controls land.”

Further to this, I would be grateful if the Minister could provide the clarification that the Law Society of Scotland has asked for on the way in which the two registers will interact, on how any disputes will be resolved—including on what is registered and what takes precedence—and on whether any additional resource will be provided directly from the UK Government to Registers of Scotland so that it can continue this work.

It is vital that Companies House reform does not slip off the agenda. We would have pressed new clause 4 to a vote, had it not been so similar in intention to the official Opposition’s new clause 7. It is unfortunate that all we are getting on Companies House will be a White Paper. We have already had extensive consultation on this, and we know the problems. They are obvious, and the Government have no excuse for not acting on them today.

[Dame Angela Eagle]

Does the hon. Lady share my frustration, which was widely voiced in the Treasury Committee when we were doing our report on economic crime, that although the Government have known what is wrong with Companies House for a very long time, we have had virtually no movement to reform it except for an announcement that there might be enough money to do so in 2024?

[Alison Thewliss]

The hon. Lady is right. This is entirely inadequate. With every day that passes, more and more guff gets put on to the Companies House register and the less valuable it becomes as a register.

We need finally to introduce verification. It is beyond belief that there is no Government verification scheme. Filing a tax return or applying for a passport or driving licence all require the use of a Government verification scheme. Graham Barrow, a Companies House expert, has pointed out that people need more ID to take out a library book than to set up a company in this country. That is absolutely ridiculous. Verification, when it is brought in, must also apply retrospectively. Companies House must go back through the register and look at all issues that existed in the past, because there is already so much nonsense in the register that needs to be weeded out, not just for reasons of accuracy but because it is being used to defraud people and by companies that are phoenixing. It is being used for all kinds of things that are resulting in people losing out.

Graham Barrow has also suggested that Companies House verification could reduce incorporations by close to 50% while making practically zero difference to corporate commercial activity in the UK. That shows the level of guff in the Companies House register. The examples of failures of accuracy at Companies House are legion. A Global Witness report in 2019 found an address in London where at least two company service providers appeared to host a number of companies apparently controlled by children under the age of two, who not only had access to the profits of the company but also the right to appoint directors and voting rights. That is quite extraordinary. There are some quite prodigious two-year-olds on that register.

It is long past time to act. The SNP’s new clause 4 would make Companies House an anti-money laundering supervisor, as it is strange that Companies House is not. That would go some way towards closing the door on those who seek to abuse the system. I wrote to the Government consultation three years ago to say that Companies House must have better and more robust mechanisms to ensure the information it holds relating to beneficial ownership is adequate, accurate and current. That still stands today.

There has also been a lack of action on Scottish limited partnerships. When I made my submission to the consultation, no fines had been handed out for non-compliance. Three years and four months later, I am pleased to report that is no longer true. Of the thousands of Scottish limited partnerships that have registered no person of significant control, there has now been a single fine of £210. We can all agree it is not the best deterrent if there is no consequence for not following the rules.

The Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) spoke earlier of action, but action is not impressive if those who have continually not complied with the rules do not even face a fine. That goes for all the mechanisms in the Bill that levy a fine. If the Government will not actually levy a fine and collect the money, there is little point putting it in the Bill.

SNP new clause 23 would ensure that beneficial owners of Scottish limited partnerships must, at last, be published, which would ensure transparency. Scottish limited partnerships are being used, again and again, in nefarious ways to move money and goods around the world. They have been involved in war crimes, child pornography and arms deals. The loopholes in Scottish limited partnerships and at Companies House have to be closed, as they harm not only individuals who suffer the effects of these crimes but Scotland’s reputation. Although they are called Scottish limited partnerships, Scotland plays no part in them. They are an historical arrangement legislated for in this place.

The Scottish Government’s crime campus at Gartcosh is doing great co-ordination work on tackling economic crime in Scotland, but much of the legislation and company registration responsibility that holds us back is still held here at Westminster. Our good name must not be tarnished any longer by continued inaction on these reserved matters.

SNP amendment 41 would ensure that reasons are given for any company claiming to have no beneficial owner or person with significant control. At the moment, companies do not have to account for that. They can just say, “We don’t have an owner, and we do not know who has significant control.” That is not acceptable, particularly when we consider that Scottish limited partnerships possess a separate legal personality allowing them to own assets, to enter into contracts, to sue or be sued, to own property, to borrow money and to issue certain kinds of security. Typically, limited partnerships are not treated as separate legal personalities and are not able to do those things, but Scottish limited partnerships are uniquely different in that way.

Scottish limited partnerships are taxed as though they do not have a separate legal personality, and no tax is payable by the partnership itself. Instead, the tax authorities look through the partnership structure and tax the partners on their share of partnership income and gains, in line with their profit-sharing ratios. Provided that the partnership is not trading in the UK, however, no UK tax will be payable by non-UK-resident partners.

We have known for years that Scottish limited partnerships are a dodge, and that money has gone in and out without taxation. We know they have been used to launder millions of pounds in dirty money created by illicit business activities. We need to see action finally to put a stop to this.

Unexplained wealth orders have been lauded by the Government in recent weeks as a powerful tool to tackle dirty money, but only nine have been used in four cases since their introduction in 2018. We support improvements to unexplained wealth orders, and we support bringing property held in trust into scope. We hope this will finally allow the National Crime Agency to do more with unexplained wealth orders and make them work.

Tom Keatinge of RUSI explained to the Treasury Committee today that unexplained wealth orders have not survived contact with reality. We can only hope that the reforms will make them more effective and more anchored in reality.

Susan Hawley, the executive director of Spotlight on Corruption, cautioned:

“The focus needs to be on confiscating and seizing assets not just investigating them… Without addressing the serious issues that law enforcement faces from shrinking budgets, decrepit IT systems, to…losing staff to the private sector, the new legislation will not make any difference at all.”