Criminal Finances Bill

Baroness Kramer Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I speak very much in support of my noble friend Lady Bowles on this occasion. The issue she is attempting to tackle is that of delay. There are serious gaps in the Bill—as they have just finished a consultation, I suspect that the Government recognise that. The “failure to prevent” focus which it has brought on a limited number of issues should have been applied to the broader range of very serious business and economic crimes. On these Benches, our great fear is that if occasion is not taken in this Bill to put in place the structure that will enable action to be taken on those issues, there will be a long delay, because bringing forward new legislation in the environment of Brexit will mean that everything is very seriously delayed. In that time, we will find ourselves in a situation where companies believe that they are potentially able to get away with it.

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[Lord Judge]

My Lords, I add my voice to that. I support the general idea behind Amendment 165 but it proposes rather a bureaucratic new clause. Why cannot the court simply have power to make orders in accordance with its subsections (2)(a) and (2)(b), where it thinks it appropriate? Why do we need subsections (3) and (4) at all, as company B has already been convicted? It is a matter for the court to decide what sentence should be imposed; it does not need permission or an application by the prosecution. If I may say so, it seems that this would make a complex process to deal with something very straightforward. The court needs to be vested with the powers which are understood to be included on the basis of this amendment. Its compliance procedure would require an external body and, if we are doing that, can we perhaps add that there should be a report to the court about whether the appointed verifier is satisfied that verification has taken place?

As to Amendment 170, I am just a little troubled about subsection (2ZB) in its proposed new clause. It says:

“The court must not make any order under this section unless it is satisfied that the person bears responsibility”.


Fine—I understand that—but this is a penal decision. Are we saying that the court must be satisfied to a criminal standard or to a civil standard?

[Baroness Kramer]

My Lords, perhaps I may add one phrase only to this debate. I want to speak to Amendment 170 and suggest to the Government that this is frankly a no-brainer. We cannot afford to have inappropriate directors continuing to run companies, particularly when their inappropriate or inadequate behaviour has been exposed in the kind of circumstances discussed under Amendment 170. It is really important that the courts have a full range of tools. We no longer live in a world where the old-school tie and friendships determine who the appropriate directors of companies are. They have to be held to professional and appropriate standards. This proposed new clause would enable that to happen and I frankly cannot see why it should present any difficulties to the Government.

[Baroness Williams of Trafford]

My Lords, I am pleased that the amendments in this group have allowed us to have an extended debate on the tax evasion offences in Part 3 of the Bill. I am pleased to say that the Government are supportive of the intentions of these amendments, although that is not to say that further legislation is necessarily required.

Amendment 164 seeks to require the Secretary of State to publish an annual report on the number of companies that have, under the Public Contracts Regulations 2015, been excluded from tendering for public contracts, or had existing contracts terminated after being charged under the new offences. I fully agree that contracting authorities should be able to exclude bidders that have been convicted under the new offence. The Public Contracts Regulations allow for this in appropriate cases. They grant contracting authorities discretion to refuse to award a public contract to an entity that has been involved in grave professional misconduct. Such misconduct may include committing the new offences of corporate failure to prevent the criminal facilitation of tax evasion. However, government does not collect information centrally on the number of organisations that have been excluded from public contracts under the 2015 regulations. This is because these decisions to exclude are taken by individual contracting authorities on a case-by-case basis, and this may include the new corporate offences.

Introducing a reporting requirement would create a burden on contracting authorities. Each contracting authority would have to make a return to central government, detailing the occasions that exclusion from a bidding process has occurred, and central government would then have to collate all these reports in order to compile national statistics to be published in the report. Such a reporting requirement would go against the Government’s drive to simplify the public procurement process and to cut red tape.

Current efforts are focused on ensuring that contracting authorities have the necessary information to know whether those bidding for contracts have relevant convictions so that contracting authorities can make more informed decisions on whether to exclude them. This includes the introduction of a robust conviction-checking process to prevent bidders with convictions for relevant offences—including the new offences—winning public contracts. This was announced at last year’s anti-corruption summit and is about to be piloted by the Crown Commercial Service.

Amendment 165 seeks to introduce a system of corporate probation orders. This would allow a court to require relevant bodies found guilty of the new corporate offences to amend their prevention procedures. I welcome the noble Lords’ amendment. It is absolutely right that relevant bodies convicted of the new offences, and thus found to have inadequate prevention procedures, should be required to implement changes to those procedures. In response, I draw noble Lords’ attention to Clause 48(2) of the Bill, which adds the corporate offences to the list of offences for which a serious crime prevention order can be imposed under the Serious Crime Act 2007. This enables a court passing sentence on a person, including a legal person such as a corporate body, to impose a serious crime prevention order to prevent, restrict or disrupt their involvement in serious crime by imposing prohibitions, restrictions or requirements on them. The terms of these orders may require the relevant body to allow a law enforcement agency to monitor how it provides services in the future.

Relevant bodies convicted of the new offences are criminals. They do not require special or different sentencing powers. They can be adequately sentenced under the existing criminal law, using a serious crime prevention order to enforce change to prevention procedures. Such an order can do anything that a corporate probation order would. Alternatively, similar provision can be included within the terms of a deferred prosecution agreement. I trust therefore that noble Lords will see that their commendable objective can already be achieved within existing law.

I thank the noble Baroness, Lady Bowles, for Amendment 170. I share concerns about ensuring that those who are unfit to be directors are identified and disqualified from holding such posts. The amendment seeks to amend the Company Directors Disqualification Act 1986 in order to allow a company director to be disqualified by the court when a relevant body is found to have committed one of the new corporate offences, or a similar failure to prevent an offence under the Bribery Act 2010.

At present, under the Company Directors Disqualification Act 1986, a company director can be disqualified on conviction by the sentencing court. Alternatively, the Secretary of State for Business, Energy and Industrial Strategy can apply to the High Court for an order that a company director be disqualified. In either case, the company director would be a party to the proceedings, and thus given the opportunity to present their defence.

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[Lord Hodgson of Astley Abbotts]

My Lords, the theme of corruption and the damage it does to society has been the thread running through all our debates this afternoon and, indeed, on our first day in Committee last week. When you have powerful speeches from the noble Baronesses, Lady Stern and Lady Meacher, the right reverend Prelate the Bishop of Peterborough and my noble friend Lord Kirkhope, you have to be influenced by what they are telling you. When they link it to the idea of a gold standard of a publicly available register—although after the noble Lord, Lord Eatwell, had finished with Companies House, gold was no longer the metal that I would associate with that institution—you feel that there may be an exceptionally strong case. Equally, as you reflect on it, you begin to wonder whether the best may not become the enemy of the good.

In trying to clarify my thinking on this very difficult issue, I ask my noble friend on the Front Bench to focus in her reply on three points that are important to me. They relate to the big three of the overseas territories mentioned in the amendment: Bermuda, the British Virgin Islands and the Cayman Islands. The others are much smaller; they may be important in the future but the major difficulties will arise with the first three.

First, can my noble friend confirm what the noble Lord, Lord Beith, said—that those three territories are going to have an up-to-date register of company ownership—and the date by which it is going to be in place? If it is going to be in place, are the Government satisfied that each register operates effectively and accurately?

Secondly, I come to the verification point raised by the noble Lords, Lord Eatwell and Lord Naseby. Since information is put into these registers by third parties, which have titles such as corporate service providers—CSPs—trust or company service providers, and so forth, are the UK Government satisfied that the regulatory regime in each of these territories ensures that the CSPs operate to timely and accurate standards? Are there adequate checks on their performance? For example, are there, as we have in the City of London, fit and proper person tests to make sure that those who are providing the information have decent standards of behaviour imposed on them?

Thirdly and finally, as my noble friend Lord Kirkhope said, are UK law enforcement agencies satisfied with the level of co-operation and assistance provided by these regulatory authorities? Do they get prompt and helpful responses or are the responses dilatory and evasive? If my noble friend was to say that she could give the Committee assurances on those points, my concerns about the best being the enemy of the good would rise in significance. Of course we are seeking a gold standard but surely in the short term what is vital is not that I or other Members of your Lordships’ House should be able to interrogate the register but that the relevant law enforcement agencies should be able to do so, and should be able to do so promptly and to get information promptly. Then, I hope, as enforcement standards rise and, as my noble friend Lord Naseby said, the United States begins to bring all parts of its dominion into proper behaviour, the gold standard of full public disclosure may well be appropriate.

I quite understand why the noble Baroness wishes to do this but my concern is that if we go too far, too fast now, the malfeasant—and it will be those who go first—will drift away to still murkier regimes. We may have only half a loaf and the noble Baroness would like the full loaf, but at least we have half a loaf. If we go to murkier regimes, there will be no way of getting any sort of collaboration, co-operation or help at all to tackle what I think everybody in your Lordships’ House agrees is a really important problem and is imposing terrific damage and harm on our fellow citizens, particularly in the developing world.

I hope my noble friend can answer my questions. Are there going to be prompt and accurate registers in the major territories—and, if so, by when—or are they there now? Are those who upload information into the registers properly checked, verified and regulated? Do our law enforcement agencies really get wholehearted collaboration and assistance from their opposite numbers in those three territories?

[Baroness Kramer]

My Lords, I am a signatory to Amendment 167, which was moved so eloquently by the noble Baroness, Lady Stern. I have signed that amendment because I struggle to see any effective way forward other than a route that essentially follows the lines that she outlined.

In this House, I think that every Member is utterly dismayed by the level of corruption in many countries across the globe, particularly those with some of the poorest and weakest populations. But there are also kleptocracies with sophisticated developed populations which do huge damage to their countries and to international affairs. If we look at the strife that drives people to become refugees and migrate across borders, on a scale that we have hardly seen in the past, there are criminal groups which manage themselves so effectively. All of those groups are enabled—indeed, can survive—only because they can find a portal with which to interface with the legitimate financial services community.

The work we are trying to do with these amendments is to close down those portals because the impact of that would be phenomenal, and not just for developing countries. It would have a great impact on the developing world and potentially on us. There is almost nothing we could do that would have more impact in bringing peace, opportunity and prosperity across the globe. This takes great courage, but it is also a great prize.

On the argument being made today, first, I congratulate many of the countries which have moved forward, for example to establish central registers. Work is being done in the overseas territories—I know it is true in the Crown dependencies as well but I understand their different constitutional position, which is why they are not included in Amendment 167—to establish a powerful relationship with UK enforcement authorities. If that were sufficient to close down those portals to the people who we know should not be able to use them, I would be happy to stop at that point. But I have found no one who believes it is true that enforcement authorities would be able to act through those central registries in ways sufficient to close down the routes and effectively shut out so many of the people who we think should be shut out from the legitimate financial world.

The only route I can see to make this reasonably or wholly effective is transparency. I fully accept that transparency at the global level is the obvious ideal, but I am a realist. I do not think anybody in this House believes that a global standard of transparency, with public access to central registers, will be available in my lifetime—and probably not in my children’s lifetime. Achieving that global standard is near impossible, so how do we move forward and at least create the reality that more and more portals will be closed down to those who try to use them? I was proud of this country when it took a very strong and difficult position to lead not only on central registers, for example, but on transparency. It said that if nobody takes the lead and moves out in advance, the rest will never follow. There is no basis if one waits for everybody to move together. We still face that situation.

I have met with representatives of the BVI and Bermuda and I hear the case presented for the Cayman Islands, and others such as Jersey and Gibraltar. I fully understand that every country on our list, even those that think they are touched by the underlying principle of the amendment, are quite offended. They feel that they are reputable places which have done a great deal to make progress on the elimination of corrupt practices. I understand their sensitivity on that issue, but the problem with which we are dealing is so much bigger.