Sanctions and Anti-Money Laundering Bill [Lords]

Anneliese Dodds Excerpts

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[Dame Margaret Hodge]

I entirely agree. Indeed, if we leave the EU without having implemented reforms that would have an impact on the overseas territories, the EU will blacklist them.

I know that there are many principled Conservative Members—including the right hon. Member for Sutton Coldfield (Mr Mitchell)—who care passionately about transparency, and have championed the cause from both the Back Benches and the Front Bench for many years. I urge them all to make clear to their Front-Bench colleagues that they will support a cross-party amendment setting a clear and reasonable timeframe within which the overseas territories would be required to prepare and launch public registers of beneficial ownership. I hope that the Government will listen to the advice of leading Back Benchers on their own side. Those of us who are involved in campaigning for transparency are not seeking short-term political advantage. What we want is an important, sustainable change that will have a lasting impact on the process of stamping out financial skulduggery, and a considerable impact not just on the United Kingdom’s public finances but on those of the poorest nations in the world.

We can never build a global Britain on dirty money. We will not create a strong economy on the back of being the jurisdiction of choice for every kleptocrat and crook in the world. Our British overseas territories will not prosper over time on the basis of being safe havens for illicit wealth. Transparency is an essential tool in the battle against all financial crimes. Exchanging information behind closed doors, which the Government claim is sufficient, particularly disadvantages the very same countries that suffer the most from financial crime and money laundering, because they have the weakest regulatory agencies in operation.

Relying on regulatory bodies is also very much second best. Even our under-resourced bodies such as Companies House are at best reactive in their work on uncovering financial crimes; there is very little evidence that they are undertaking proactive investigations. Indeed, the constant flow of scandals is strong evidence that the system based on the private automatic exchange of information is not working.

Let us consider the case highlighted recently by Global Witness of the $75 million paid by Glencore to Dan Gertler, a controversial businessman accused of bribing senior officials in the Democratic Republic of the Congo to advance mining interests. The money was originally due to be paid to Congo’s state mining company, but following a secret agreement was paid into one of Dan Gertler’s companies registered in the Cayman Islands. Or let us consider the case revealed in the Paradise papers of Jean-Claude Bastos, who managed Angola’s sovereign wealth fund and was paid more than $41 million from the fund via a secretive British Virgin Islands company. The BVI company was itself owned by a series of secretive offshore companies, but the ultimate beneficial owner was Mr Bastos.

Today’s Guardian contains disturbing revelations that North Korea broke international sanctions aimed at inhibiting the development of weapons by using a network of companies based in our tax havens to acquire millions of dollars-worth of fertiliser, coal and other commodities—our tax havens, undermining our national security and that of other western nations. Secrecy enables wrongdoing.

Ironically, the British Government have accepted that argument, because we are ourselves publishing our national register of beneficial ownership. The standard that we accept for ourselves should be the standard we expect for our overseas territories. To pretend, as the Government do, that the overseas territories are making good progress is nonsense. It was 2013 when David Cameron first demanded public registers; nearly five years later, we are still waiting for a number of the jurisdictions, including Anguilla and the Turks and Caicos Islands, to set up a central register.

Let me take this opportunity to debunk some of the myths that were prayed in aid when this matter was debated in the House of Lords. Raising the spectre of identity theft and personal security risks is wide of the mark. Public registers can have tightly defined case-by-case exemption policies to protect individuals who are genuinely at risk. Ministers claim that no other countries are adopting public registers. Again, that is not true: the EU is currently implementing the fifth anti-money laundering directive requiring all EU members to implement public registers by 2019, including Gibraltar, and we should be implementing that.

Arguing, as Ministers do, that we should not act until others have acted is a wretched excuse. We have been bold in leading the movement to stamp out corruption; we should pursue that course and be proud of it. As the number of tax havens decreases and the noose tightens around the remaining tax havens, our action will make action elsewhere in the world inevitable.

I welcome today’s statement from the Secretary of State for Exiting the European Union that the UK wants to lead a global race to the top in rights and standards. There is no better way of leading that race to the top than by insisting that our overseas territories adopt public registers of beneficial ownership.

Public registers will not undermine legitimate businesses or individuals who want to continue to take advantage of low-tax regimes. They will expose those who seek to hide their money because they have received it corruptly, or who unlawfully evade tax, all too often at the expense of poor people and poor countries.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

On public registers, is it not also the case that firms that are more transparent are often more successful than those that are not? We see that in the examples of Santander, SSE and many others.

[Dame Margaret Hodge]

My hon. Friend on the Front Bench is completely right.

Finally, while we were all horrified by the destruction wrought by the hurricanes last year, those disasters should never, ever be used as an excuse for allowing kleptocrats, villains and tax evaders to prosper. In a White Paper on the overseas territories published in 2012, the Government stated:

“As a matter of constitutional law the UK Parliament has unlimited power to legislate for the Territories.”

I am urging tonight that the Government use their powers to insist that our tax havens—our overseas territories—put in place public registers in a defined timescale. That is a reasonable demand. Stopping it would create a grim stain on Britain’s reputation as we move to establish credibility in a post-Brexit world.

--- Later in debate ---

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a real pleasure to respond to the debate on behalf of the Opposition. The Bill, as many colleagues have indicated, purportedly aims to provide the UK with an appropriate system to stop the corrupt and the criminal from benefiting from our British financial system. I will first consider the sanctions-related matters before looking at the money laundering matters, although they are of course intrinsically linked.

As with much of the Government’s Brexit-related legislation, many concerns have been expressed about the lack of parliamentary oversight of the Bill’s provisions. As my hon. Friend the Member for Bishop Auckland (Helen Goodman) set out, many positive changes were made when the Bill was discussed in the other place, and they must not now be rolled back in this place. Other matters of concern persist, as indicated by the hon. Members for Glasgow Central (Alison Thewliss) and for East Dunbartonshire (Jo Swinson), and echoed in the calls for clarity from the hon. Member for Huntingdon (Mr Djanogly).

We still lack clarity over the extent to which our sanctions regime will be aligned with that of the EU 27. The evidence is clear that sanctions are more effective when imposed collectively—the hon. Members for Glasgow Central and for Huntingdon made that point very well. I was disappointed by the Foreign Secretary’s comments in this regard, which I thought were contradictory; he simultaneously admitted that unilateralism might not be effective while vaunting the possibilities of a totally independent regime. There are no indications in the Bill of how we will concretely ensure the continued co-ordination that is so necessary in this area.

We heard in the debate some persuasive arguments about the need for stronger commitments in the Bill, not just fleeting mentions, on the necessity for sanctions to target those responsible for human rights violations, particularly those responsible for gross human rights violations, as in the so-called Magnitsky regimes. The right hon. Member for Sutton Coldfield (Mr Mitchell) spelled out clearly the reasons for such an explicit approach. I hope that Government Members will have listened to those arguments.

Finally in relation to the sanctions-related provisions, the hon. Members for Glasgow Central and for East Dunbartonshire mentioned the need to ensure that measures are appropriately calibrated so that they target criminal individuals and terrorists, not legitimate aid agencies and financial service providers delivering legitimate services. It is essential that we have accurate and appropriately granular mechanisms in that regard.

Let me move on to money laundering. I was very pleased, as I am sure were many Members, about the informative and courteous style of debate that we have had on money laundering tonight. I am afraid that is in contrast to the comments on money laundering from the Government when introducing the Bill, which I thought were disturbingly brief. It is clear that the problem of money laundering is getting worse, not better. I will not go into all the arguments and evidence on that now, because that has been done very ably by other Opposition Members, not least my hon. Friend the Member for Ealing Central and Acton (Dr Huq). At the centre of the UK’s problems with money laundering lies a lack of transparency and accountability, both of which are essential if we are to ensure that the criminal and the corrupt do not profit from our leaky financial system.

On the issue of public registers of beneficial ownership in our associated territories, may I say what a powerful tour de force we have had from the right hon. Members for Arundel and South Downs (Nick Herbert) and for Sutton Coldfield? I am sure that the right hon. Member for Arundel and South Downs, as a former Home Office Minister, has a huge insight into the damage being done by the lack of transparency in this area, aiding international criminals. The Government must listen to the uncomfortable truth that he has set out so ably tonight.

My right hon. Friend the Member for Barking (Dame Margaret Hodge) set out how long this process has been running, as the Government requested beneficial ownership registers from the overseas territories five years ago. Many Members have indicated that we have had a slippage from the Government’s initial commitments in this regard. The failure to clean up their act by some of our overseas territories is having a severe impact on their reputation. As someone who has had many meetings with representatives of those jurisdictions, and who supports them tremendously, let me say that it is not their foes but their friends who are arguing for more transparency, because we see the reputational damage that the lack of transparency is doing to them. As my right hon. Friend the Member for Barking said, the Government’s failure to act constitutes complicity. I agree with the hon. Member for Amber Valley (Nigel Mills) that the UK must exercise leadership.

There has also been a lack of clarity from the Government over whether they are minded to follow EU-level developments, particularly the anti-money laundering directive known as AMLD 5. I agree with the hon. Member for Chelmsford (Vicky Ford) about many things—we worked together previously in the European Parliament—but I am afraid I cannot agree with her assessment that we know for certain that the Government will continue to cohere with EU-level developments. The hon. Member for East Dunbartonshire (Jo Swinson) and my hon. Friend the Member for Enfield, Southgate (Bambos Charalambous) explained very clearly why we do not have the clarity that we need.

I think it especially important to focus on the regulation of trusts. Under David Cameron, the Government argued against their inclusion in EU registers of beneficial ownership. The Foreign Secretary claimed that the UK was ahead of the rest of the EU with our register of beneficial ownership, but we have been a drag on the EU when it comes to more transparency on trusts.

[Boris Johnson]

A drag?

[Anneliese Dodds]

At EU level, we have been. David Cameron argued against the inclusion of trusts in EU beneficial ownership registers, but we now have a chance to change. I can see that the Foreign Secretary is appalled by the idea that we might have acted as a drag in that regard, but I am sure that he will be converted to the cause of more transparency.

As the hon. Member for East Dunbartonshire rightly mentioned, it is deeply concerning that the timetable for the foreign-owned property register has slipped so substantially. I take on board what was said by the hon. Member for Amber Valley—we already have a register of sorts, in the guise of Private Eye’s tax haven property map—but that map was created, essentially, by mistake. It was created when the Land Registry released data, by mistake, which was then matched up with Companies House data. The Government should be delivering the register themselves. I appreciate that there should be additional disincentives, but that is not a reason not to act now.

Finally, let me say something about the issue of due diligence in relation to British company ownership. Yes, we do have a public register run by Companies House, but the responses to a series of parliamentary questions that I have tabled have shown that there is little or no oversight of the veracity of the data supplied to it. That is illustrated by the worrying case mentioned by my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle), to whom I pay tribute for all his effort to help his constituent. There are not enough resources in Companies House, and there is a regulatory gap in respect of those registering companies with it directly. There are even problems for those who register through company formation providers, many of which have been shown not to be fulfilling their responsibilities. In that context, it may be necessary to launch a pincer movement requiring all such firms to have UK bank accounts: at least they would then be covered by anti-money laundering legislation through the bank account system.

The Financial Action Task Force is due to report next month on the UK’s approach to money laundering and ensuring the integrity of the international financial system. I am sure Members in all parts of the House agree that it would be a huge international embarrassment if the taskforce concluded that the UK Government had chosen not to adopt measures that would help to clean up our financial system. I am afraid I agree with my right hon. Friend the Member for Barking that there are grim stains on the UK’s reputation in this regard.

Let me issue one last plea. I have been very disturbed by the Government’s decision not to defend publicly the journalists who were singled out by Appleby. It picked on British companies, the BBC and The Guardian, which were taken to court after releasing details that were in the public interest. Sadly, the Treasury team—I see that some of its members are present—has not yet been willing to condemn that behaviour. I appeal to Ministers, including those in charge of foreign policy, to do so now, and to confirm that those disclosures were in the public interest.