Economic Crime (Transparency and Enforcement) Bill

David Davis Excerpts

2nd reading
Monday 7th March 2022 Commons Chamber

[Priti Patel]

My hon. Friend is absolutely right. I said that unexplained wealth orders were one of several tools, but we have other tools that have to be deployed. Registration, beneficial ownership—all those aspects are covered in the legislation, and rightly so. By accelerating the legislation, we are concentrating on the sharpest tools we can use and the powers we can bring into force in the most focused time. Expediting this legislation will send a very strong signal that the UK will not be a home for corruption.

[Mr David Davis (Haltemprice and Howden) (Con)]

Will my right hon. Friend give way?

[Priti Patel]

I will give way shortly, but first I will make some progress, if I may.

This will be about hurting Putin and his vicious regime, which has robbed the Russian people of their chance for democracy, peace and prosperity—not only that, but even their own wealth has been used and abused by these kleptocrats and oligarchs. The reforms in the Bill will give us greater power and more information to identify and investigate the illicit wealth of Russian criminals, their allies and their proxies. The new property register will have an immediate effect, dissuading those intending to buy UK property with illicit funds. Oligarchs could be slapped with an unexplained wealth order—one of the tools that we will have at our disposal—and the Treasury will be better able to act when financial sanctions are breached. We are implementing the most severe package of sanctions ever imposed on Russia or on any major economy.

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[Priti Patel]

My right hon. Friend is absolutely right, and he has also pointed out the vast drafting that has taken place over the weekend, with various amendments. I am grateful to all colleagues, on both sides of the House, for their co-operation on many of those amendments. He is absolutely right to say that people have an intent, which is what we are going after.

[Mr David Davis]

The Russia sanctions regime is across eight different sets of regulations, and even the Commons Library could not disentangle them for me. In some cases, simply stopping people using their assets does not go far enough. For those found to be working on behalf of Putin and his elite, we should be expropriating their assets. Does this Bill simply allow freezing or does it actually allow us to confiscate assets?

[Priti Patel]

My right hon. Friend has hit the nail on the head, and I am going to come to some of that in my remarks shortly. If he will just bear with me, I would like to make some progress. I am conscious of the protected time we have today, so I ask all colleagues to bear with me.

This legislation is concise and tight for very good reasons, hence the number of amendments that have been made; we want to move at pace. But we cannot stop there, and for the benefit of this House—I know colleagues are aware of this—let me say that there will be a second economic crime Bill, a follow-on Bill in the next parliamentary Session, with further measures. We simply cannot get all the measures in right now. We have focused on the ones that will have the greatest impact and enablement.

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[Mr David Davis (Haltemprice and Howden) (Con)]

Given the nature of the debate, I will try to make my simple points in three minutes. [Interruption.] There were cheers from the Government Benches, anyway.

I suspect that we will all vote for this Bill. The House is of one in wishing to stop the murderous behaviour of Putin in Ukraine and to punish him and his elite for carrying out such evil crimes against humanity. That is not to say this is a perfectly crafted Bill. To some extent, that is inevitable; it has had to be constructed in a hurry from an original economic crime Bill that was designed for a different purpose under different circumstances. Worse than that, in some ways, it is being operated by three or four Departments, some of which are operating in areas that they are not used to, which is often not a pretty sight, and I speak as an ex-Minister in that respect.

The Government, I think, will do two sensible things. First, they will accept most, or many, of the amendments that have been tabled, which is sensible because most are thoughtful and all are well intentioned. Secondly, the Home Secretary said that there will be a second economic crime Bill and of course we are making plans and projections for that. One of its functions will be to correct the mistakes that we make today, of which there will be many, because we are dealing with a difficult and sophisticated adversary and we are making decisions quickly.

[Sir Iain Duncan Smith]

I want my right hon. Friend to extend his speech slightly. Does he agree—I hope my right hon. Friend the Home Secretary is listening too—that whatever happens with the Bill, we are clear that those in the other place who deliberately amended previous legislation to water down the provisions that would have seen us go after many of these people, have some warning not to do that ever again?

[Mr Davis]

I am pretty sure that they will hear that warning when they look back at this debate.

I do not often quote Lenin, but it is probably appropriate. As he famously said,

“A bayonet is a weapon with a worker at both ends,”

which is also true of the Bill. It will do great harm to the Russian economy and to our adversaries in Russia, but it will also do some harm to us—or at least, the retaliation will—and it will particularly hit the least well-off. We will see greater price inflation, less growth, less trade and therefore fewer jobs. We must recognise that when we undertake what we are doing here. We can make Russia a pariah state but Putin will retaliate, and we must be ready. We need to be ready for fuel crises, cyber-attacks and ludicrous threats from the Kremlin.

Beyond the Bill, there are many further things that we can do in the west and we should be ready to do them. To pick one example, the allies should be ready to reduce every Russian embassy to a bare minimum—to skeleton status—by the expulsion of diplomats at the first sign of retaliatory action from Russia. It must be clear to Russia that it will pay if it retaliates again.

We have said, and we must keep saying, that the Bill is not aimed at punishing the Russian people—that is incredibly important. It should target the Russian Government, Putin and his henchmen, which is why the actions in the Bill against oligarchs are as important as the actions against Russian banks and commercial institutions. There was some briefing from Whitehall over the weekend that implied that they are not, but that is wrong.

We have all heard the rumours that Putin has something like $200 billion of personal wealth. He does not hold any of it himself; it is held by the 140-plus oligarchs around the world. Targeting them, therefore, is at least as important as targeting the Russian state banks. To do that properly, we must act fast, which is the thrust of my new clause 29, which I will speak to later in Committee.

We should not kid ourselves. This is not an economic crime Bill, but an economic warfare Bill, and it is a war that liberal democracies cannot afford to lose.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call SNP spokesperson Alison Thewliss.

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[Jonathan Reynolds]

I understand the right hon. Member’s scepticism, and he is of course right to acknowledge, as we have heard many times in this debate, that any measures are only as good as the enforcement mechanisms that exist and the resources behind them. What is significant about a register of property is that, if we do it properly, we can essentially prevent the sale of a property, because we can refuse to register the new ownership unless the measures have been followed. However, his argument about the wider reform required, certainly in relation to Companies House, is absolutely well made, and that is why the second piece of this legislation—the second Bill—is so essential.

[Mr David Davis]

The issue of the register is obviously important, but I do not think it answers all the questions that the Government assert it does, because we may want to refuse the re-registration of a sale, but on what basis will we do it? If the individual concerned—the oligarch or whatever—is already being sanctioned, we can of course do that, but if they are not being sanctioned and it is taking six months or a year to get to that point, we can do nothing about it.

[Jonathan Reynolds]

The right hon. Member pre-empts my comments about the timescale for implementation and the worries relating to that, and there have been some very interesting and valid speeches from all sides pointing out such dangers.

However, I want to address the fact—we have not actually heard about it in the debate today, such is the seriousness of the issues—that there is, and we should acknowledge this, an argument against the transparency that all of us are seeking. It is that there are some celebrities or people of high net worth who will cite concerns about privacy in relation to this measure. They would say that they are worried there will be potential risks to them from this register coming into effect.

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[Jonathan Reynolds]

I am always happy to be of service to the hon. Gentleman, and we will be looking to do that. He will of course know that a comprehensive spending review is imminent.

[Mr David Davis]

Will the hon. Gentleman give way?

[Jonathan Reynolds]

I feel I must proceed so we can go into Committee, given how important this is.

To conclude, the measures in this Bill are necessary. They are overdue, but I am pleased that they will make progress today. There is much more to do, but I hope that this legislation will mark a turning point in the UK no longer being known as a destination of choice for hiding ill-gotten gains. The measures will have an effect, and it is possible some people will argue that they will limit foreign investment in the UK. I would say that any money stopped by this Bill is money we should never have been open to in the first place. As the journalist Edward Lucas wrote a decade ago in his book “The New Cold War”:

“If you believe…money matters more than freedom, you are doomed when people who don’t believe in freedom attack using money.”

Too many parts of this country have been compromised by their proximity to the extreme wealth and influence the oligarchs can wield. The perception that the UK has been willing to turn a blind eye to this has been of considerable detriment to our reputation and legitimacy. If this Bill marks the moment when that starts to change, it will be very welcome indeed.

Economic Crime (Transparency and Enforcement) Bill

David Davis Excerpts

Committee stage
Monday 7th March 2022 Commons Chamber

[Paul Scully]

Essentially, yes. We want to make sure that we can work with hon. Members on that. I do not want to accept all those amendments here and now, but I want to make sure that we can get it right in the other place, working with them at that stage.

[Mr David Davis (Haltemprice and Howden) (Con)]

I would like this to be rendered in English for the world at large to understand. If the Minister puts into law in the Lords all the amendments that we proposed, will it not still be the case that nothing can be done to stop a Russian oligarch from moving, selling or transferring his assets, even if we know all about it, until the moment when he is actually sanctioned?

[Paul Scully]

First, I thought that when I said, “Essentially, yes,” it was a clear, two-word answer to a simple question. I will cover my right hon. Friend’s amendments in my closing remarks, but I wanted to speak to the Government amendments at this point. However, his new clause 29 would give a huge amount of powers not just to the Foreign Secretary in relation to Putin’s regime, but to future Foreign Secretaries. We need to tread carefully and look at that carefully before the House acts in that way.

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[Mr David Davis]

I will speak solely to cross-party new clause 29. It is a very simple clause with a simple purpose: to make sure that the sanctions we intend against the oligarchs in Putin’s regime are actually effective.

I remind the House of a previous occasion when we had great fanfare for action against economic crime. Since we introduced unexplained wealth orders some years ago, we have tried to operate the orders only nine times against four individuals, and they have worked only twice. They failed seven out of nine times. The Government are doing something in this Bill to try to improve the equality of arms between Government lawyers and the multimillion-pounds-a-year lawyers on the other side. The Government have done good work that will help, but it does not address, because it cannot address, the most fundamental problem with unexplained wealth orders because, since 1990, it has been almost impossible to get any trustworthy evidential information out of Russia. The very least that does is slow the process leading to sanctions. The process leading to sanctions will be incredibly difficult and incredibly slow even with this better balance.

The Prime Minister and the Foreign Secretary have confirmed that the Government have—this is a tabloid quote, I am afraid—a “hitlist” of more than 100 oligarchs. So far, 11 days into this conflict, we have sanctioned just 17 individuals, with some very obvious and notable exceptions who we can see and hear redisposing their assets even as we sit here. Press reports have quoted Government sources suggesting that it will take six months to work through the rest of the hitlist. And the rest, as I suspect it will take longer.

[Dame Angela Eagle]

I am a big supporter of the right hon. Gentleman’s new clause. President Zelensky is to address us tomorrow; would it not be good for us to be able to tell him that that new clause was accepted tonight? We would then be able to say that we can crack down much faster.

[Mr Davis]

It would be good. It would allow us to crack down more effectively; not so much more quickly but more effectively.

What will we see during the months it takes to get people to the legal point at which they are sanctioned? We will see Russians scrambling to sell off their houses, dispose of their businesses and offload their football clubs. In respect of many of the measures, we will know a lot more about it and be much better informed, if none the wiser, with respect to what they are doing. Multimillion-pound car collections will be loaded into jets; anchors will be weighed on superyachts; priceless artworks will be squirrelled away—all to wend their way back to Russia or some other safe haven for these people. By the time our sanctions have taken effect on not all but many of the oligarchs, the horse will have well and truly bolted. Indeed, the background noise is currently the sound of a stampede of horses bolting as the door on the stables creaks shut. That is what we have to put right.

My new clause will help to prevent all that. It will not do everything, because it is only one piece of the repertoire of things we need to do, but it will allow the Government to publish a hitlist—forgive the tabloid term—or a list of individuals who are being considered for sanctions. In the same way as someone may wait on bail before they face trial, the freedoms of those on the list will be restricted for the period so that they do not flee. Once a person’s name appears on the list, their ability to sell, liquidate or transfer out of our jurisdiction their assets—cars, homes, businesses, jets, investments, cash and so on—will be frozen. They will then be unable to sell those assets or move them out of the UK. They will still be able to use them—there will be beneficial advantage to them—but their ability to thwart what we are trying to do today will be restricted.

Given my history in this House, some may be rather surprised that I am willing to see a restriction of a specific human property right—that is what my new clause amounts to and that is quite unusual for me—but we need to take action now; otherwise, any sanctions that the Government seek to impose will be entirely meaningless for a large number of these people. We see Chelsea being sold today and all sorts of actions going on that cannot be helpful to what we are trying to achieve. My new clause would give the Government breathing space—time to go through the legalities of formally sanctioning the oligarchs and pals of Putin who rightly deserve to be the target of sanctions.

Although the Government have identified 100 oligarchs to sanction, other countries have identified more. This is going to be a long war. The sanctions are going to be in place for years, not months. They will have effect only if we move more quickly than the targets.

[Kevin Hollinrake]

Will my right hon. Friend give way?

[Mr Davis]

Not for the moment; I am just about to finish the point. To move rapidly is the only way to ensure that our sanctions actually hit Putin where it hurts. I will now give way—I have never not given way in my life.

[Kevin Hollinrake]

I am most grateful. My right hon. Friend’s new clause is very important but, as he would probably concede, a difficulty with it is that we need alongside it transparency in respect of beneficial ownership; otherwise, we will not know who owns the assets. The problem is that the ownership of a lot of the assets is hidden. Does he agree that for his new clause to be truly effective we need a day-one capability to see who owns the assets?

[Mr Davis]

Yes, I do, but my hon. Friend must bear in mind that the burden in the new clause—the responsibility and requirements—falls on the person who is sanctioned.

[Sir Iain Duncan Smith]

I was not going to intervene on my right hon. Friend but I have been looking back over the list in his new clause. Does he think there is a slight problem, in that the new clause talks of

“selling any assets they own or…moving any assets they own or have an interest in out of the United Kingdom, or…moving any of their funds out of the United Kingdom”

but it does not cover anything about gifting assets out to an individual who may then transfer them immediately? Does he think that ought to be included in the measure?

[Mr Davis]

Yes, my right hon. Friend makes a good point. The reason why gifting and transferring to relatives, which is another category, is not in there is because I took—I almost ripped it out of the legislation—the legislation that we put in place for Skripal, which also omitted those things. My right hon. Friend is quite right, though, and had my new clause been accepted today, I would have looked to make two changes when the Bill went to the Lords, the first of which would be to do that—to tighten it. The other would be to include a right of appeal if it went on too long the other way round, to balance the human rights issue.

We should bear in mind the fact that the National Crime Agency, for example, has people on police bail. I know of a case in which people have been on police bail for five years and we know nothing about it, so the restriction in my new clause on somebody who faces possible sanction is much less than the restriction the NCA imposes on some people. It is vital that we prevent ultra-wealthy individuals, with their teams of highly paid lawyers, advisers and accountants, from exiting the UK with their ill-gotten gains or hiding them where we cannot find them or get them.

By the way, I am a great believer in the presumption of innocence, but if somebody came out of the old Soviet Union—Russia—in the years between 1990 and 2010 with £1 billion, £2 billion, £3 billion or £4 billion to their name, and they were previously an officer of the Russian state, I do not quite start with the presumption of innocence that I would normally start with. I would start with a requirement on them to explain where that came from. That seems to me to be a reasonable, common-sense modification of my normal “mad-libertarian” interests.

[Anthony Mangnall]

The presumption of innocence must surely be broad and not subjective in respect of any one individual. My right hon. Friend made the point about people on bail; the whole point is that if someone is on bail, a case has already been presented and built up. I of course understand that my right hon. Friend is trying to get to the point at which the case has been built up. On his new clause, how is the process reversed if someone should not be on the list? How would the Foreign Secretary say they are no longer on the list? There is nothing in my right hon. Friend’s new clause that specifies how that would work.

[Mr Davis]

My hon. Friend is right. If we put the measure in place, there would be a decision at some point as to whether someone was on the list or no longer on the list—“We’ve decided that you’re not subject to sanction.” That clearly has to be part of the operation. By the way, I am afraid police bail does not quite work the way my hon. Friend thinks it does: in the case that I had in mind, there is no case but they have been on police bail. That is just an example to demonstrate that the idea in my new clause is not an unheard of option.

I see Dame Eleanor is looking at me, so let me finish by saying that if we back new clause 29, we will ensure that our sanctions regime will often have real effect. It is proportionate and simple and it would be effective.

[Dame Margaret Hodge]

I rise to speak specifically to new clause 2, on the funding of enforcement agencies, but I wish to say a couple of things about the amendments in general. First, I am grateful to the Minister for the Government’s spirit and approach in respect of the amendments. We all want the same thing and are attempting to find the most effective wording and mechanism to achieve our shared objectives. I hope the Minister sees the amendments on which there are votes tonight as utterly constructive. I assure him that they really do have cross-party support among Back Benchers in the widest possible sense. A lot of people are behind them and I hope that reassures him that we want to help and are not here to cause him problems.

I am grateful for the concessions that the Government have already made on penalties, on the implementation period, on speeding up sanctions—I very much welcome those new clauses—and on the reporting of unexplained wealth orders, which I have been after for a long time. As I have said to the Minister privately, our amendments include drafting amendments. I am glad he is going to talk to us about amendment 3. He will have heard the general concern throughout the House about whether the wording targets the individuals we wish to target. The other amendments are about strengthening the Bill.

To talk generally, some of the amendments point to the fact that this is not an economic crime Bill. A range of vital issues have to be addressed in a substantial and substantive economic crime Bill. A lot of people have talked about Companies House and tougher regulation; I would include company formation agents in that. We have talked about other enablers and effective enforcement, which is covered in our amendment. My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) raised SLAPPs, and issues in respect of whistleblowers and Scottish limited partnership are also important. That all shows that we do need a comprehensive Bill, but I accept that this is a very important first stage.