Countering Russian Aggression and Tackling Illicit Finance

Angela Eagle Excerpts

Wednesday 23rd February 2022 Commons Chamber

[Alison Thewliss]

The hon. Gentleman is absolutely correct on that. There is a real need to work together on this, but the UK has been several steps behind, unfortunately.

I note with interest that it was reported that shares in Russia’s two biggest banks went up yesterday, in relief that they had not been targeted. The five banks targeted represent a mere fraction of the Russian banking sector. Only one of the five is on the Russian central bank’s list of systemically important credit institutions. The Black Sea bank is Russia’s 197th largest bank by assets, IS bank is 155th and GenBank is 92nd. They were hardly the biggest fish to go after. Ministers have assured us that there will be a ratchet process, but it feels to many that they are not moving fast enough or taking enough action to make a real impact here. Those cronies and oligarchs who have money to shift will no doubt be doing so already. The Minister of Foreign Affairs of Ukraine, Dmytro Kuleba, has tweeted this morning:

“To stop Putin from further aggression, we call on partners to impose more sanctions on Russia now. First decisive steps were taken yesterday, and we are grateful for them. Now the pressure needs to step up to stop Putin. Hit his economy and cronies. Hit more. Hit hard. Hit now.”

The UK Government should listen to that plea from our allies.

There was much talk during the recent statements of military action and of sending tanks and guns, and while that might be of immediate assistance in an escalating scenario with tens of thousands of Russian troops on the march, we must not neglect to tackle the long-standing scandal on the doorstep of this Parliament that has allowed President Putin to gather his strength and finance his corrupt regime. What frustrates me, other colleagues across this House, anti-corruption experts in the field and the Glasgow Central constituents who email me is the lack of action and urgency on illicit finance. The UK Government alone have this responsibility, but they have not taken the ample opportunities they have had over the years to stop the flow of Russian dirty money through the City of London. The Minister for Security and Borders, the right hon. Member for East Hampshire (Damian Hinds) told the Treasury Committee that he was not happy, and we are not happy either. The Government could have taken stronger measures in the Sanctions and Anti-Money Laundering Bill Committee, on which I sat. They did not do so. They have their registration of overseas entities Bill, which is still waiting for action. They have had ample opportunity to reform Companies House and to tackle Scottish limited partnerships and the lack of investment in enforcement agencies. People are getting away with this corruption through a lack of proper enforcement.

One of the most egregious examples is the Russian laundromat case, in which some 113 Scottish limited partnerships played critical roles in a massive Russian money-laundering scheme that moved $20.8 billion out of Russian banks. One of those involved was Igor Putin, cousin to the Russian president. I would like to pay tribute to my former colleague in this House, Roger Mullin, who did so much to tackle the scourge of the misuse of SLPs, along with the researcher Richard Smith and the journalist David Leask. The UK Government’s actions to tackle that were painfully slow and they have still not nailed the issue of the abuse of SLPs or the lack of enforcement on persons of significant control. Money has been taken from Ukraine recently via SLPs as well. Some £36 million in a scam being investigated by authorities last year ended up in the bank account of the SLP Remini Consulting.

Let us not kid ourselves: this is profitable business. The lack of enforcement has allowed an industry to flourish unchecked in the leagues of enablers right here in the UK. The journalist David Leask has pointed out:

“The mundane, unhappy reality is that we have outright crooks and a fair number of white-collar professionals happy not to look too closely at where money comes from. These ‘enablers’ here”—

in Scotland—

“and in England are a threat to the UK and to the wider world. They corrode our democracy and distort our markets. And they are laced throughout our society. They are company formation specialists, corporate lawyers and accountants who provide financial services to oligarchs, gangsters and corrupt politicians. They rarely think of themselves as bent. But that is what they are, ethically if not legally .”

The UK Government cannot talk seriously about tackling illicit finance if they do not go after those who enable it. They ought to start by looking in their own coffers for the donations with dubious sources and for those whose funds allow them to come into the Government’s inner circle. The Conservative party has accepted nearly £2 million in donations of Russian-linked money since the Prime Minister came into office in 2019, with a quarter of the Cabinet reportedly having Russian-linked donations. The Prime Minister and the Minister said that these were legitimate donations from British citizens, but handing them golden visas first, before getting the money, completely undermines the whole principle. I have constituents who have waited years for a visa, but anyone with enough money can waltz right in and do what they like.

[Dame Angela Eagle (Wallasey) (Lab)]

The hon. Lady and I both sat and listened with increasing incredulity during the Treasury Committee hearings on economic crime. Does she share my frustration at the Government’s seeming inability to act on any of their stated concerns?

[Alison Thewliss]

I absolutely agree with the hon. Lady. The evidence is so clear but the action is non-existent. It just is not being done.

--- Later in debate ---

[Dame Angela Eagle (Wallasey) (Lab)]

It is a pleasure to follow the hon. Member for Basildon and Billericay (Mr Baron). I wish to focus a bit more on the economic crime and money laundering aspect of today’s debate, because we talked about sanctions last night and the political situation has been well covered.

I am a member of the Treasury Committee. A couple of weeks ago we published our 11th report of the Session, which is before the House, and we await the Government’s response with interest. It was frustrating to take evidence for that report in the knowledge that in 2019 our predecessor Committee had come up with detailed recommendations on dealing with the issues of money laundering, economic crime and fraud that were then becoming a problem, only for us to have seen the levels of all those crimes rise rapidly from 2019 and onwards into the pandemic, costing this country billions of pounds.

Others have pointed out how we allow London to be described as a laundromat for dirty Russian money, which is what the Intelligence and Security Committee’s Russia report told us was the case when it was published in 2020, after a significant delay that was down to the Prime Minister’s not allowing it to be published. It is frustrating to be two years further on from that report and to see no effective response to many of the things it said. If the Minister had come to the Dispatch Box and said, as a result of this debate, “We’ve seen the Russia report; we’ve been a bit tardy but we’re now going to put its recommendations into effect”, I would have been reassured. Yesterday, I asked the Prime Minister whether, in the light of Putin’s actions in Ukraine, he would do that, but he did not answer in the affirmative.

We are, then, in a situation in which London can still be described as a laundromat for dirty Russian money. It is now seen as the jurisdiction of choice for dirty money. One of the most vivid things I recall from when the Treasury Committee sought evidence for its report on economic crime was the ministerial evidence we were given. Ministers provided no satisfaction whatsoever that proper progress was being made. Where is the hold-up? Where is the blockage that is preventing what should be obvious progress from being made? Some measures have been announced for years and years, yet we have seen no proper or legislative progress.

We all welcome our City’s importance as a financial centre, but it is now being compromised by a baffling lack of urgency in dealing with economic crime. Our security is being threatened by international criminal gangs, kleptocrats and terrorist financing, yet the Government seem to have become fixated on describing complex processes rather than acting to stop their outcome, which is rising levels of economic crime and fraud, affecting many of our constituents when they are scammed out of hard-earned money.

[Anthony Mangnall]

I apologise for interrupting the hon. Lady and for not having read that report. Did it include anything on the reform of Companies House to include more transparency in respect of ownership and structures? That is a huge issue.

[Dame Angela Eagle]

Perhaps the hon. Member should read the report, which is very comprehensive. If he had read it, he would know that it did indeed deal with that issue. It is something that we have been talking about, and our predecessor Committee was talking about, for a very long time, yet there is still no action. Apparently, the Chancellor has put aside a little money and the Government are talking about doing something in 2023-24. Our predecessor Committee was talking about this in 2019. Nothing has happened. Why has nothing happened?

We urgently need greater transparency, tougher regulation and tougher enforcement. As others have said, we need to introduce an open register of beneficial ownership of companies. The Prime Minister repeats that that is what the Government are doing, but there is no sign of it. David Cameron promised one in 2015 to get him through a G20. The legislation exists in draft—the hon. Member for Glasgow Central (Alison Thewliss) served on the Joint Committee on it and read it in minute detail—but there is still no progress. The Prime Minister reiterated that we were going to have an open register of beneficial ownership of companies to get him through the G7 in 2020, but there is still no sign of it. Why? We have enough time. The Prime Minister has had offers from the Opposition to facilitate the passage of legislation quickly to get it on the statute book, but the will does not seem to be there.

We need an economic crime Bill. Lord Agnew, who was responsible—you could not make it up, Madam Deputy Speaker—for fighting fraud in the Treasury, resigned at the Dispatch Box in the House of Lords in frustration because he could not perceive any urgency or determination to tackle the rising levels of fraud in the pandemic support schemes. He was so aghast at the lack of willingness there seemed to be in the Government that he felt he had to resign to “smash some crockery”, as he put it.

We need reform of the corporate liability law to crack down on money laundering and facilitation of this kind of crime in the banks. We need to deal with the urgent reform of Companies House. I have already discussed this. It is on the Government’s so-called agenda year after year after year. People can still create a company at Companies House, say that the owner of it is Vladimir Putin or Mickey Mouse and nobody will tell them not to do it. They can then use that to defraud various people and launder their cash. This is a joke and there is still no urgency in dealing with it.

We need to deal with the fragmentation of law enforcement if we are to deal with economic crime. No one part of the law seems to have any kind of coherent responsibility for enforcing it, so even if we had tougher regulation, we do not have the enforcement muscle to make sure that we get the outcome. Why are the Government dragging their feet? Why are they so ineffectual? Why is there no measurement of the outcome? Why do we have this kind of benign neglect as the forces of darkness gather, as they focus on laundering their dirty money through the City of London? We know how this affects people in terms of property prices. How can we have sanctions if we do not know who owns the companies that the money is flowing through? This has to be dealt with. The problem is getting far, far more urgent than it has ever been before. Our democracy is at stake and we expect this Government, finally, to get off their backside and do something about it.

--- Later in debate ---

[Damian Hinds]

Unfortunately we are overrunning, and I will not get through responding to the points made in the debate if I take a lot of interventions. I can do either, but I think it is important that I respond to the points made in the debate.

Specifically in relation to Russian illicit finance, the National Crime Agency has increased the number of investigations into corrupt elites. Some of that response will be visible through law enforcement, policy and international engagement. Other options are less visible but that does not mean they are not impactful. We are going further. It is vital in the fight against dirty money that we increase transparency in order to know who ultimately controls and owns a company or property, and the Prime Minister is committed to bringing forward new legislation to include reforms to Companies House and to limited partnerships, and to introducing the register of overseas entities beneficial ownership Bill.

Last week the Home Secretary announced the closure of the tier 1 investor visa scheme—

[Dame Angela Eagle]

rose—

[Damian Hinds]

Just a moment.

We want innovators to invest in Britain, and the replacement visa programme will be about creating a positive economic impact, not just volume of cash. I was about to come on to responding to the points that the hon. Member for Wallasey (Dame Angela Eagle) made about the Intelligence and Security Committee report, but I will wait to hear what she has to say now.

[Dame Angela Eagle]

I appreciate that. Given that a register of overseas beneficiaries has been promised since 2015, will the Minister say when we are going to get it? All we get is Prime Ministers telling us that it is coming, but it never arrives.

[Damian Hinds]

I am not making an announcement today on the programme of debates and legislation in this House. We are committed to these measures, and I will say a little more about them.

The hon. Lady and others spoke about the ISC report. Since the Salisbury attack, we have made real progress in disrupting malign influence in the UK. At that time, as hon. Members will recall, 23 Russian intelligence officers in diplomatic roles were expelled from this country. The Counter-Terrorism and Border Security Act 2019 strengthened the powers of our police to stop, question, detain and search individuals travelling through UK ports to determine whether they are involved in hostile-state activity, and we have strengthened our scrutiny of inward investment through the National Security and Investment Act 2021.

We are looking to bring forward legislation to strengthen our powers to counter threats from foreign states and to update our counter-espionage laws. This will provide the security services and law enforcement agencies with the tools they need to tackle the wide range of future threats and evolving tactics of other states.

My hon. Friend the Member for Isle of Wight (Bob Seely) brings particular expertise to this debate, and he spoke about the range of ways in which other states may seek to harm us. I reassure him of our intent to bring forward legislation on precisely that range of state threats.

My hon. Friend the Member for Basildon and Billericay spoke about the wider forces of history, the need to defend and nurture democracy and the twin role of defence and soft power, and I absolutely agree. I reassure the hon. Member for Glasgow Central (Alison Thewliss), who speaks for the Scottish National party, that the Government remain committed to reforming limited partnership law and recognise the important role of limited partnerships.

My hon. Friend the Member for Devizes spoke of the financial system’s critical role and the possible leverage effect. I reassure him that nothing is off the table. The hon. Member for Aberavon (Stephen Kinnock) asked about the report on tier 1 visas issued between 2008 and 2015, and I confirm that we will publish that report. The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) asked, among other things, about the economic crime plan. Thirty-four of 52 actions are now complete, with good progress having been made on the remaining 18.

We take illicit finance very seriously. The UK is an open economy, it is an attractive place to live and it has one of the world’s leading financial centres. That combination attracts many legitimate investors, but I do not underestimate the extent of the illegitimate, nor do I understate the imperative to clamp down on it.

We have the global human rights sanctions and the anti-corruption sanctions. Building on the Proceeds of Crime Act 2002, the Criminal Finances Act 2017 brought in account freezing and unexplained wealth orders. We reformed and have now ended tier 1 visas. We created the National Economic Crime Centre and set out the economic crime plan, and we are going further by increasing investment in law enforcement, reforming anti-money laundering alerts and embarking on a major reform of Companies House.

We already have a register of beneficial ownership and will introduce a register specific to real estate, and we will further strengthen unexplained wealth orders. Those key economic crime measures are an urgent priority for this Government, as we recognise the collective threat that serious criminals, kleptocrats and corrupt elites present to our financial system and national security. Dirty money and kleptocracy are at the heart of the Putin regime, and they are not welcome. This Government will use all the powers at our disposal against individuals and entities that seek to harm our democracy and our people.

Question put and agreed to.

Resolved,

That this House expresses solidarity with the people of Ukraine, and supports their sovereignty and Ukraine’s territorial integrity; condemns Russian aggression and emphasises the UK’s commitment to NATO; resolves to end illicit finance that rewards and sustains the Putin regime in Russia; calls on the Government to introduce an Economic Crime Bill, an Overseas Entities Bill and a register of beneficial ownership by the end of March 2022; and further calls on the Foreign Secretary to make a statement to this House on the implementation of the recommendations of the Intelligence and Security Committee’s Russia Report, HC 632, published on 21 July 2020.