Illicit Finance: War in Ukraine

Catherine West Excerpts

Thursday 13th July 2023 Commons Chamber

[Catherine West (Hornsey and Wood Green) (Lab)]

I thank the hon. Member for Harwich and North Essex (Sir Bernard Jenkin) for bringing this motion before the House. I also thank the hon. Member for Rutland and Melton (Alicia Kearns), who is currently travelling, and the Foreign Affairs Committee for their efforts in authoring the report, which shines a light on the scourge of illicit finance that continues to erode our economic and political institutions, the impacts of which have been made all the more apparent by Putin’s illegal and egregious war of aggression against Ukraine.

As was outlined in the integrated review of 2021 and reinforced in the refresh, Russia remains the UK’s most acute threat. Our national security and that of our closest allies is intrinsically linked to the outcome of the war in Ukraine, and it remains incontrovertible that assets laundered through London and the UK are having a direct impact on the Kremlin’s capacity to wage that war. Labour has been in lockstep with the Government all along on this question, and we will continue to be, should the Government bring forward further steps to strengthen the UK’s position. However, we consider it our duty as an Opposition to make clear where we believe the Government need to do more, and today is a good example.

I wanted to focus on the NATO question, but we went through it quite thoroughly this morning. In light of the Prime Minister’s challenge to us all to look back on what Mr Stoltenberg said at the conference and on page 4 of the report—I was making notes—perhaps collectively we should go back, look at the conference and its findings, and come back with a further strengthening of our position. I can guarantee that Labour will be in lockstep with the Government on this; I think both this debate and this morning’s statement have shown that.

Let me address very briefly the matters that have been raised in the debate. My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) outlined a number of concerns. He watches this issue closely and has been involved—together with my right hon. Friend the Member for Barking (Dame Margaret Hodge)—in these questions for many years in this House. It is imperative that the Government come forward as quickly as possible with the measures that are needed.

I extend my thanks to the charity that the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) mentioned. We all have examples of people who have come forward in the past couple of years and shown amazing compassion and strength. I know so many families in Hornsey and Wood Green who have opened their doors and had families stay, even beyond the six months. Even though the scheme was not perfect—we all knew that—it was fantastic to see our citizens come forward to help.

To move on to the substance of the FAC’s report, it is clear that if the Government had introduced the necessary legislation in time, they could have stemmed the flow of illicit finance prior to Russia’s full-scale invasion of Ukraine. However, kleptocrats and oligarchs have been emboldened, believing fundamentally that their vast wealth will be safe in London and that their assets will flourish. To go further on that thought, perhaps we could do more on the question of property and China, rather than waiting until tensions develop in that particular relationship.

The Labour party has been pressing the Government for action for years, and has raised the issue of illicit finance several times on the Floor of the House. In January, the shadow Foreign Secretary, my right hon. Friend the Member for Tottenham (Mr Lammy), made it clear that when we are in Government we will answer calls from the US and beyond to establish a transatlantic anti-corruption council to co-ordinate the international fight against corruption, money laundering and illicit finance. In a speech just this week at the Bingham Centre, my right hon. Friend announced that Labour would join calls for the establishment of an international anti-corruption court designed to prosecute the most egregious acts of corruption across the globe.

The FAC report illustrates that the measures adopted in the Economic Crime (Transparency and Enforcement) Act 2022 did not go far enough to tackle to the problem. It states that the steps taken by the Government since February last year

“are not preventative but rather constitute damage limitation”—

damage brought about by years of apathy on the issue. The new Economic Crime and Corporate Transparency Bill finally acts on some, but not all, of the promises in the Government’s 2019 economic crime plan. Indeed, the six-month delay between the two pieces of legislation has allowed thousands more illicit companies to register.

We welcome the Bill, but it must go much further to ensure not just that we keep up, but that when it comes to cracking down on illicit finance, Britain holds the gold standard. It was therefore profoundly disappointing that in Committee back in January there was little in the way of movement from the Government, even when they struggled to find fault with our amendments and new clauses. Every single effort by Opposition parties to strengthen the Bill was met by resistance from Ministers, and every Opposition amendment that was pressed to a vote was defeated. As a result, Committee stage amounted to little more than a litany of missed opportunities, forcing us to return to those arguments once again in this debate, as we will no doubt have to do again during the Bill’s remaining stages.

Although we welcome the fact that the Government have finally U-turned on introducing a corporate criminal liability offence, the Bill’s provisions on Companies House and the supervision of third-party enablers, especially trusted company service providers, are too weak and do not match international standards. The Bill also fails to set out a strategy to recoup assets seized through economic crime enforcement and to compensate the victims. The right hon. Member for Chingford and Woodford Green mentioned righting a wrong—finding a remedy.

Indeed, although we also welcome the steps taken in the Bill on cryptocurrencies, what consideration is being given to sanctioning cryptocurrency mixers Tornado Cash and Blender? [Interruption.] It is not a cocktail! The US Treasury has sanctioned both; why have we not? Will the Government bring the UK into line with the US Treasury’s approach? Putin and his cronies are more than capable of exploiting such gaps in our regime, so why are we so slow and allowing that to persist? That example is illustrative of the Government’s strategy when it comes to tackling Russia here at home. The report outlines that well:

“Although Ministers have spoken eloquently in the House about the need to clamp down on kleptocrats, rhetoric has not been matched by constructive action. Meanwhile, corrupt money has continued to flow into the UK.”

More broadly, even the limited progress that the legislation offers is hampered by the fact that the Government are not sufficiently resourcing the bodies tasked with enforcing the changes. The hon. Member for Inverclyde (Ronnie Cowan) went into the question of resource in detail, so I will not repeat that point, but the report finds that 0.042% of GDP is spent on funding national-level economic crime and enforcement bodies. As a result, money laundering prosecutions have dropped by 35% in the past five years.

[Liam Byrne]

My hon. Friend is making a brilliant speech. On her point about enforcement, one thing the Government could commit to this afternoon is the Prime Minister appointing a new anti-corruption tsar, which would help. Many of us in the House are grateful for the leadership of my right hon. Friend the Member for Barking (Dame Margaret Hodge), who is not in her place. She has written to the Prime Minister asking him to make that appointment. Surely that is something that the Minister could give us some good news about.

[Catherine West]

I will allow that message to pass straight across the Dispatch Box to the Minister so that she can answer it. That query was going to be in my concluding remarks, so now I will not need to repeat it.

Spotlight on Corruption highlights that the Bill

“only funds the first two years of the plan”,

so we need to plan for more and more finance, particularly as this sort of crime and online crime become more complex. Will the Minister outline how the Government will ensure that the plan has necessary funding to ensure that public investment matches the scale of the challenge that we face? The National Crime Agency, the Serious Fraud Office and other bodies urgently need further resourcing to row back years of inactivity in this area and to protect legitimate business and safeguard our national security.

We must also do far more to oppose those who seek to use their wealth to avoid scrutiny, skirt the law and remain beyond the reach of those who enforce it. We therefore welcome the fact that the Government are, through amendments to the Economic Crime and Corporate Transparency Bill, finally providing judges with greater powers to dismiss lawsuits designed purely to evade scrutiny and stifle freedom of speech. We in this House all followed the case of the excellent author Catherine Belton, who was taken to court on a frivolous basis, on one of those trumped-up charges, and suffered a great deal of distress as a result.

In January, revelations came to light that in 2021, the Treasury, which was then under the leadership of the current Prime Minister, issued special licences allowing Wagner Group warlord Yevgeny Prigozhin to circumvent sanctions issued before Putin’s illegal invasion of Ukraine and to level legal proceedings against a UK journalist. That highlights fundamental problems in the Government’s competence—not only on SLAPPs, but in their seemingly flippant issuing of general licences and exemptions to our sanctions regime, with virtually no ministerial oversight. As my right hon. Friend the Member for Barking made clear in a letter to the Prime Minister, and as my right hon. Friend the Member for Birmingham, Hodge Hill reminded us, it has now been 400 days since the Government’s anti-corruption champion resigned.

Labour will continue to push the Government on the full seizure and repurposing of Russian state assets. There has been little or no movement from the Government on that issue in more than 500 days, despite our Opposition day motion of three weeks ago setting out the means to do so, and despite the fact that our allies are finding the courage to forge ahead. We must keep up. When can we expect the Government to introduce legislation that would allow the repurposing of Russian state assets? The Canadians have already done it; when will the UK Government catch up?

That issue is coupled with the challenge of closing loopholes in our regime that still allow the prohibitions established in secondary legislation to be circumvented. I understand that the Minister will write to the shadow Minister, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), after he raised at a statutory instrument Committee on Monday the question of the continued flow of Russian oil.

Fundamentally, the FAC report catalogues a litany of errors and shortfalls, and illustrates the extent of the Government’s sluggishness in bringing forward legislation fit to tackle the challenges that it outlines. We support the steps taken in the Economic Crime Act and the Economic Crime and Corporate Transparency Bill, which has been in the other place, but changes in the law must be accompanied by a decisive shift in culture on tackling illicit finance, on Government proactiveness, and on authorities having the means, resources and focus to tackle the issues at their core.

I thank all colleagues for their contributions, and particularly the Foreign Affairs Committee for its forensic and fair appraisal of the UK’s performance in this area. Positive steps have been taken, and we welcome them. We have made it clear that we will support the Government where we believe they are getting it right, but progress cannot now beget apathy and complacency. There is a long way to go to expunge dirty money from this country entirely. We owe it to the people of Ukraine to tear such finances from our institutions root and stem.

I hope that the Minister has heard the views of colleagues and will provide assurances that the Government will not take their foot of the pedal when our priority must be to build on the progress that has been made.