Sanctions and Anti-Money Laundering Bill [Lords]

Andrew Mitchell Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Dame Margaret Hodge]

I do not think that the hon. and learned Gentleman and I are going to agree. I am going to make some progress because I know that other Members wish to say certain things.

Openness and transparency do not stop the overseas territories from choosing to try to compete on tax. Although I would not approve, they can all set a corporation tax rate of zero. If they believe that that is a way of attracting financial services into their countries, they are free do so. We are asking for openness and not much more. I do agree with their argument that our registers need to be improved, but that is not an either/or; it is a both/and. We need both to improve our registers and ensure transparency in our overseas territories. To those who argue that the money will transfer to other tax havens, I say this: there may well be some leakage, but our tax havens play a disproportionately large role in the secret world that makes tax havens. If we lance that boil, it will be far easier for us to secure transparency elsewhere and much harder for other tax havens to sustain their business models.

Our campaign on transparency is not and has never been partisan. My party believes passionately that transparency is vital in the battle against financial crime and money laundering, but all Members of this House—from all the political tribes—share our determination to eliminate the wrongdoing that inevitably springs from the secrecy that pervades our tax havens. We cannot sit here and ignore the practices that allow Britain and our British overseas territories to provide safe havens for dirty money. If we can act to root out the corruption, we must do so. Our proposal is simple but powerful. It is easy to implement but lethal in its effectiveness. It is not just legally possible; it is morally vital. Britain and our overseas territories will not get rich on dirty money. We must act now and new clause 6 is an important move in doing so. I ask the House to support it.

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

I draw the attention of the House to my declaration in the Register of Members’ Financial Interests.

Before I speak about new clause 6, I would like to thank my right hon. Friend the Minister for Europe and the Americas on two other issues, the first of which is the Magnitsky amendment, for which many of us made the case on Second Reading, especially with regard to a degree of independent input from the House into the visa banning and sanctions regime. No doubt aided by the dreadful events in Salisbury, we have all now got to the same place, and I am grateful to him and his colleagues for ensuring that that is the case today.

The second issue—I know from our time together at the Department for International Development that my right hon. Friend understands this well—is about trying to ensure that no unnecessary restrictions will stop money flows for humanitarian charities and non-governmental organisations that often operate with great bravery in extremely difficult and contested areas. I understand that very good progress has been made on that, and I hope that he will keep an open mind if there are future difficulties in that regard.

I turn to new clause 6. It has been a tremendous pleasure to work with so many colleagues from both sides of the House, and I am grateful to many of my own colleagues for standing firm in the face of considerable pressure. It has been a very pleasurable experience to work closely with the right hon. Member for Barking (Dame Margaret Hodge) over the past six months, and the House has clearly benefited hugely from her distinguished period as Chair of the Public Accounts Committee. I think that this is the fourth time that we have been around this track, so it is now time for the House to assert its authority and nudge the Government into the right place. I am therefore delighted that the Government have indicated that they will accept new clause 6. I cannot forbear to point out that this is evidence that, in a hung Parliament, power passes from the Cabinet room to the Floor of the House of Commons. I was going to urge the House to support new clause 6 and, with the deepest respect, reject the Government’s starred amendments, which were tabled at the last moment yesterday, but in fact you did not select them, Mr Speaker.

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[Dr Matthew Offord (Hendon) (Con)]

It is not just crooked money though, is it? The World Bank’s International Finance Corporation invested £400 million through Cayman-based investment vehicles in 2015 alone, and that money supported projects in 24 developing countries. There is good as well, is there not?

[Mr Mitchell]

Of course, and that is exactly the sort of fact that would be displayed by an open register. My hon. Friend makes my point for me. That is the sort of openness that we seek. We seek to expose the sort of money that I have outlined and that the right hon. Member for Barking so eloquently described.

David Cameron’s Government understood this clearly. He showed real leadership by insisting that what he called the “shroud of secrecy” must be ripped away in this fight against money laundering and tax evasion. If the House had drawn back from agreeing to new clause 6 today, it would have sent a terrible signal against what has previously been a really strong strand of global Britain. It would have been a huge relief to thieves and money launderers around the world that our tax havens would have remained open for business.

I turn to the four matters of concern to the overseas territories in the hope of reassuring them that the House is putting in place a practical measure that is not as serious as some of them seem to believe. The first concern is the belief that the measure will damage the overseas territories’ economies and destroy their income. No doubt the same arguments were used against the abolition of the slave trade. It is true that there may be some immediate but modest effect, but consider the nature of much of the funding that the overseas territories are handling and that I and others have described. In fact, the economy of the British Virgin Islands, for example, may actually improve, because much of its business is professional, transparent and completely proper. In the past, I have myself invested in an international property fund in the BVI that was properly governed. In such cases, people from different jurisdictions can put funds in without a tax charge, but when they take funds out, they pay tax in the jurisdiction where they live. So it is perfectly possible, and in my view quite likely, that if open registers are fully implemented in a jurisdiction such as the BVI, some of the serious international financial organisations and banks will choose to go there, although they do not do so today.

[Sir Henry Bellingham]

I declare an interest as chairman of the all-party group for the British Virgin Islands. I sympathise, in many ways, with much of what my right hon. Friend is saying, but if there is a temporary hit to the BVI economy because of real difficulties in transitioning to the new arrangements that he has outlined, what help should the Foreign Office try to give to the BVI?

[Mr Mitchell]

I will come to that point in a moment, but I hope that my hon. Friend will extol to his friends in the BVI the fact that this is not something that they should regret and seek to avoid, but something that offers them real commercial and economic opportunities.

The second argument, as we have heard, is that the territories already have closed registers that are available to law enforcement authorities and HMRC which, in the case of terrorism, will react promptly—almost within an hour. That is of course true, but it completely misses the point. That point is made eloquently but passively by the Panama and Paradise papers: it is only by openness and scrutiny—by allowing charities, NGOs and the media to join up the dots—that we can expose this dirty money and the people standing behind it, and closed registers do not begin to allow us to do that.

[Robert Neill]

I understand my right hon. Friend’s desire to achieve this measure and recognise the work that he has done on it, but I want to follow on from the point made by my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham). The Government of Spain, for example, often use broad-brush terms such as “tax haven” against the law-abiding British territory of Gibraltar. Will my right hon. Friend extol the fact that Gibraltar has complied and continues to comply absolutely with all EU requirements? We do not help the overall cause by allowing British territories that comply with the rules to be tarred with the same brush as those that do not, as some people will use that against law-abiding British Gibraltarian citizens’ interests.

[Mr Mitchell]

My hon. Friend makes an extremely good point about Gibraltar. I have heard him speak about that subject in the House previously, and what he says is absolutely right. Last night, I received a three-page letter from the Chief Minister of Gibraltar. I was at a loss to understand why he felt that new clause 6 negatively affected him, since he has already committed, through the EU directive, to implement the whole of the new clause one year earlier than is specified. I therefore feel that the Chief Minister and my hon. Friend should be content with new clause 6.

[Mr Kenneth Clarke]

I entirely agree that the Government of Gibraltar achieve the standards described by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), and I agree with my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) that as they are about to go further, the new clause does not affect them. I recall, however, that that was not always the case. Twenty or 30 years ago, persuading the then Government of Gibraltar that access to EU financial markets required an altogether higher standard of regulation and compliance was not an easy task, and we had to imply that we might take steps to exercise our powers unless something was done about it. That might be a useful precedent for the overseas territories in the Caribbean with regard to the step that the House is taking today.

[Mr Mitchell]

My right hon. and learned Friend the Father of the House, given his longevity and distinguished ministerial experience over many years, will be familiar with the points that are being made about Gibraltar and, indeed, about the importance of clamping down on money laundering.

Thirdly, the overseas territories pray in aid the prayer of St Augustine—“Oh Lord, make me chaste, but not yet”—and argue that all the hot money will go to the Dutch Antilles. But it is a little bit like the battle against malaria. We seek to narrow the footprint of that disease—in this case, of illicit money—to diminish the areas affected, and then eradicate it. Through this measure, we will significantly narrow the footprint of tainted money. We should bring the same vigour and determination to the fight against poisoned money as we do to the fight against deadly insects.

[Huw Merriman (Bexhill and Battle) (Con)]

I worked as a repackaging lawyer who used to set up these companies around the globe—[Interruption.] For European investors, I hasten to add. I gently point out that it is very easy to set up a Delaware business trust, and as more moneys flow into Delaware business trusts, it may be difficult to persuade the American authorities to take the same steps as these, laudable as they are, because otherwise the trusts will be worth even more money to Delaware and the United States. Will my right hon. Friend consider that?

[Mr Mitchell]

My hon. Friend makes a good point about Delaware, but perhaps we should come to that on another occasion.

[Chris Bryant]

We should bear it in mind that the sanctions regime imposed by the United States of America ends up being far more aggressive, meaning it is far more difficult for Russian oligarchs to hide their money there. In fact, that has now had a significant impact on Oleg Deripaska’s holdings in this country.

[Mr Mitchell]

The hon. Gentleman speaks good sense. He, like me, will have been very pleased to hear from the Minister how the Magnitsky provisions will apply.

I come to the fourth and final argument that the overseas territories submit: the use of an Order in Council is over the top in this day and age; and using the royal prerogative to legislate for the OTs by Order in Council is wrong. It is right that the House considers that argument, but our new clause does so by making an Order in Council a last resort to be used only if the overseas territories have not done what we have already done in the UK and introduced open registers by the end of 2020. Others have mentioned the precedents for using an Order in Council. This House and the Government are entirely entitled to use such a mechanism if necessary—they have done so, as the right hon. Member for Barking explained—but those signing and speaking to this new clause hope that it will not be necessary. In summary, the overseas territories share our Queen and travel under our flag, and they should also share our values.

In this new clause, the right hon. Lady and I have agreed to significant concessions that I hope the overseas territories and Crown dependencies will appreciate. First, there is the total exclusion of the Crown dependencies. The Lord Chancellor was most persuasive over the past week, and they do have a different governance structure. However, I believe that Parliament will expect Her Majesty’s Government to make the point persuasively that we hope that the Crown dependencies will embrace the same ethical position and equal transparency, and accept that what is sauce for the goose is also sauce for the gander.

Secondly, while both the right hon. Lady and I believe that the overseas territories should take these steps now, the Foreign Secretary was eloquent in pleading the immense difficulties that have been caused to some of these economies by the hurricanes. That is why the right hon. Lady and I agreed that we would put the timescale back by some two and half years, to the end of 2020. I very much hope that the overseas territories will take note of that. We are trying to be helpful, within the confines of the principles that we have set out in the new clause.

[Sandy Martin]

Does the right hon. Gentleman agree that whatever the actual constitutional position, the British people regard the Isle of Man and the Channel Islands as part of this country and cannot understand why laws and regulations should be different in those places? Does he support my contention that the Government should work towards having the same levels of transparency and financial regulation in those Crown dependencies as are in place in England, Scotland, Wales and Northern Ireland?

[Mr Mitchell]

The hon. Gentleman has elaborated the point I have just made about how the House will expect the Crown dependencies to move towards the provisions set out in new clause 6 for overseas territories.

I urge all Members to support new clause 6. We must remember that the highly respected Africa Progress Panel has shown that in the Democratic Republic of the Congo, for example, at least £1.5 billion has disappeared in stolen funds and illicit money flows. As the World Bank has made clear, much of that money stolen from the people of Africa ends up in British overseas territories. The money stolen in that way dwarfs all the international development aid, development finance and foreign direct investment that flows into Africa every year. We owe it to the poor of Africa every bit as much as we owe it to our own taxpayers to support new clause 6 today and bring an end to this scandal.

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[Sir Henry Bellingham]

I understand the hon. Lady’s point, but I would point out that some of us worked extremely hard to build up to the exchange of notes in 2016, so that our law enforcement agencies can access key information from, for example, the BVI within a matter of hours and use it in various measures they take against serious organised crime, money laundering, international slavery and the expropriation of assets—[Interruption.] I hope that it is someone important. On 70 occasions, the law enforcement agencies have been able to move against unsavoury people and get results.

If we move too quickly and without a decent transition, many of the corporate registrations will not stay in the BVI, the Cayman Islands, the Turks and Caicos Islands, Anguilla and so on: they will move to places such as Delaware, Panama, Venezuela, Nebraska and Equatorial Guinea—which my right hon. Friend the Member for Sutton Coldfield and I know well, as we have both visited it. Unless we are incredibly careful, that displacement will take place and, as the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) pointed out, it will take place to the Crown dependencies.

[Mr Mitchell]

My hon. Friend does not appear to accept the point that has been made repeatedly today that the territories may well allow access to law and order agencies, within an hour in the case of terrorism, through closed registers, but that does not allow civil society—charities, NGOs and the media—to expose them to the sort of scrutiny that the Paradise and Panama papers did. They allowed us to join up the dots. That is why I emphatically disagree with him on this point about closed registers. They work for law and order agencies, but they do not work to stop the dreadful money laundering.

[Sir Henry Bellingham]

I will not get into an argument with my right hon. Friend because I think we agree on so much of this. My concern is that it required a leak from Panama to expose those people, and there will be many other jurisdictions that may not have leaks in future and where much of the business will go, unless the whole world moves to the end goal of open registers—