Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Wednesday 17th January 2018 Lords Chamber

[Lord Cormack (Con)]

My Lords, I had not intended to speak and—I apologise—I have not taken a close interest in this Bill, but I was moved and impressed by what the noble and learned Lord, Lord Judge, and my noble friend Lord Hailsham said. The mantra of taking back control means only one thing to me: it is Parliament taking back control. It is not Parliament conferring a blank cheque upon the Executive, from whichever party they are drawn. I am disturbed that this principle appears very much at risk.

In the previous Divisions on this Bill I voted for the Government. I did so because I have not taken a close and continuing interest in the Bill, as I indicated at the beginning, and because I have a real regard for my noble friend Lord Ahmad of Wimbledon, who I have come to know well. I respect him greatly and regard him as a Minister who has proper regard for Parliament and the constraints under which Ministers should operate. I feel for him on this issue but add my appeal to the brief but eloquent appeal of my noble and learned friend Lord Mackay of Clashfern.

Taking up the point made by the noble Lord, Lord Pannick, I very much hope that my noble friend the Minister will indicate that he truly appreciates the concerns of those who are apprehensive about an accretion of power to the Executive, and that he will, after discussing the matter further with the noble and learned Lord, Lord Judge, come back at Third Reading with something that is acceptable throughout your Lordships’ House.

We are in difficult waters. This is a precursor to a long and I am sure complicated, but I hope not acrimonious, debate on the withdrawal Bill, on which the other place is coming towards the end of its deliberations. However, it is no part of the functions of your Lordships’ House to connive at the accretion of power to the Executive. Certain things should depend upon primary legislation, not the fiat of a Minister. I hope that my greatly respected noble friend Lord Ahmad will give me a response that will not oblige me to refrain from supporting the Government.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I recognise the great importance of Amendment 71A but wish to speak to some of the other amendments with which it is grouped. As has already been said by my noble friend Lady Kramer, we have had productive discussions and have identified common ground in relation to the concerns about paragraphs (a), (b) and (d) in Amendment 72. I understand that the Minister will make a statement about the House returning to these issues at Third Reading, with assurances and language that enable me to not press Amendment 72. I also understand that the Minister will clarify the effect of the term “without prejudice” at the beginning of Schedule 2, which relates to my Amendment 76A.

Amendment 74, standing in my name and those of my noble friend Lady Kramer and the noble Lord, Lord Collins of Highbury, would introduce a failure to prevent a money laundering facilitation offence. This was elaborated in Committee, so I need only remind noble Lords that the Law Commission has long recognised a need for a change in the law to enable large corporations to be brought to justice where the need to find a directing mind gets in the way of achieving justice. This type of offence has worked not only since it was introduced in the Bribery Act but has recently been legislated for with regard to tax evasion. Money laundering is in a similar category and this offence would enable offending British companies to be successfully prosecuted here instead of us witnessing the United States getting a better grip than us: that is not being a leader on anti-money laundering. It is also proper that such a new offence is brought in by primary legislation. I give notice that at the appropriate moment I will move Amendment 74 and, if need be, divide the House.

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I conclude with a final sporting metaphor. We have put the governmental horse at this fence a good many times. Each time the horse has galloped gamely towards the fence but at the last moment has swerved away from it. If tonight the Minister once again swerves away and cannot give the reassurances that I seek, and if my noble friend Lord Faulks chooses to divide the House, I shall be happy to support him.

[Baroness Bowles of Berkhamsted]

My Lords, I put my name to this amendment but I acknowledge that it is the noble Lords who have already spoken who have made the running on this recently, so I do not wish to be seen just to piggyback. I shall simply tell the House that the noble Lords have my support and that of these Benches.

[Lord Collins of Highbury]

My Lords, I agree with all the sentiments that have been expressed. This is about a very strong commitment given by David Cameron, and what we want to hear from the Minister is a clear timetable. The noble Lords, Lord Faulks and Lord Hodgson, are absolutely right. In the previous debate we talked about transparency and those who pay. On this issue, it is not just those in the poorest countries who are paying because of this hidden money; it is our own communities. I have said before in this Chamber that to look down the river and see a skyscraper that is 60% foreign-owned, with 40% of that ownership hidden through companies, is clearly scandalous. We do not have to look far. So we need action and a very clear timetable. I hope the Minister will give us that timetable tonight.

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[Lord Naseby]

My Lords, this amendment is about closing a major money laundering loophole. Noble Lords will be aware that, last year, 606,000 companies were formed in the UK. Of these, 250,000 were set up through Companies House, but the majority were set up by company formation agents. In the middle of last year, the fourth EU anti-money laundering directive came into force, requiring company formation agents to complete due diligence checks on anyone setting up a company.

However, for reasons that are not clear to me, the Government decided to exclude Companies House from doing such due diligence. For years, Companies House has set up companies and has had to accept documents sent to it in good faith. It is not required to and does not have any statutory powers to verify or validate the information contained in them. It can act only within the parameters of the Companies Act. It certainly has no investigatory powers under that legislation and, therefore, there are no significant checks being done on companies registered through Companies House. In reality, this means that, for just £12, someone can set up a company using entirely false details without having to go through any verification checks on beneficial ownership, and with only limited checks on registered directors. Therefore, individuals who have been involved in money laundering, have convictions or have been debarred as owners in other jurisdictions can gain access to UK companies though Companies House.

Why does this matter? It is because, unfortunately, there are some companies being set up whose principal purpose is one of committing crime or which subsequently lend themselves to being used for that purpose. In extreme cases, incorporation is used entirely as a front to enable fraud to flourish. This leaves British businesses, consumers and taxpayers open to abuse. The evidence is there from an organisation called Transparency International. A couple of months ago, in November, it found that there were hundreds of British shell companies implicated in nearly £80 billion-worth of money laundering. That in itself should set off alarm bells in my judgment. Additionally, this lack of checks harms Britain’s reputation as a leading place to do business and must be addressed in the run-up to Brexit. It is essential to close this loophole to combat fraud, prevent money laundering and boost our country’s reputation.

The solutions seems pretty simple. In Committee, the Government said that they were not prepared to impose a financial burden on Companies House. However, we have to have some detailed checks and by adding a simple automated check of due diligence during the filing process, the Government can close their own loophole at a fractional cost while ensuring that the UK remains a competitive, low-cost place in which to do business. I understand that Her Majesty’s Government have recognised this is a problem and have given due thought to it. I look forward to hearing from my noble friend exactly how they may seek to close this large loophole. I beg to move.

[Baroness Bowles of Berkhamsted]

My Lords, I have added my name to the amendment of the noble Lord, Lord Naseby. We had a good mini-debate on this issue in Committee. His amendment is a neat solution to the problem that those of us involved in that mini-debate identified—that some sort of check has to be done at the Companies House stage. If money is not put behind that to enable personnel to do that, this proposal seems a neat solution. I would be interested to know whether the Government will take it up or provide something similar.

[Lord Lennie (Lab)]

My Lords, in Committee, the Minister—I think it was the noble Lord, Lord Bates—said that the OPBAS is being set up to deal with this stuff at some time in the future. I do not know when that will be and whether it is a consequence of our withdrawal from the European Union or is a separate matter. However, I would expect reassurance that that body will be up and running at least by the time that we leave the European Union, if and when we do so. Of the 250,000 companies to which the noble Lord, Lord Naseby, referred, thousands open and shut before anyone has had a chance even to notice them. Presumably, they do not always open and shut because they go bust but rather because they are concealing their activities. That needs to be addressed. I do not intend to prolong the proceedings other than to say that—I did not think I would ever say these words—I support the amendment of the noble Lord, Lord Naseby.