Russian Assets: Seizure

Debate between Iain Duncan Smith and Margaret Hodge

Tuesday 14th March 2023 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I join the right hon. Gentleman in welcoming the Ukrainian MPs who are with us today. A letter has been sent by 45 Ukrainian MPs to our Prime Minister urging him to do precisely what we want, which is not to freeze assets but to seize them. Given that support from the Ukrainian Parliament, does he not agree that there is now an urgent need for the Government to be bold and to act?

[Sir Iain Duncan Smith]

I do agree with the right hon. Lady. We have a lot of Russian assets that are currently frozen, while Ukraine is screaming out for money and support to help all those devastated areas. We can bring the two together, and that is what today’s debate is all about.

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[Sir Iain Duncan Smith]

I absolutely agree with the hon. Lady.

I want to talk about what Russian state assets are frozen and what could be frozen. It is important to note that, in Congress right now, they are already discussing this—I spoke to someone there just 24 hours ago—and in Canada, they are seriously talking about it. European Parliaments are also discussing the matter. This is a moment for us to give a lead on this and help to shape the nature of it, as we have a conference coming up shortly and I wonder whether that might be the place to lead on this matter.

According to the Bank of Russia’s own 2021 annual report, £26 billion of Russian state reserves are in the United Kingdom and, on a wider level, western Governments have now frozen some $350 billion of Russian central bank reserves in response to the invasion. There is yet more that they could do. The combined value of frozen UK properties belonging to Russian oligarchs is at least £2 billion. Funds frozen under the UK sanctions regime are passive, and that is the problem. Those funds would enable us to finance the rebuilding of Ukraine and to show Russian dirty money the door. This is the key: we send the message and we help with reparations. Several countries, including Canada, as I said earlier, and the EU are already on to this process and I urge our Government to help to give a lead on this.

[Dame Margaret Hodge]

May I draw the right hon. Gentleman’s attention to the fact that the Canadians have gone even further? My understanding is that they have already started taking action by pursuing the forfeiture of US$26 million from Roman Abramovich’s holding in Granite Capital Holdings Ltd. If Canada can do it, surely we can, too.

[Sir Iain Duncan Smith]

I agree with the right hon. Lady. If countries do this individually, it will allow terrible regimes to dodge their money around from one financial centre to another, as some will not have done it. This has to be done in one go by all the developed world’s major centres, otherwise it will end up with disputes and problems. I applaud Canada for starting, but we need the City of London, New York, Zurich and all the other major centres to be serious about making sure this cannot happen and these assets will always be seized.

I can tell the Minister of State, Foreign, Commonwealth and Development Office, my right hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan), that we understand the underlying problem, but my point is that the issues are not insuperable.

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[Sir Iain Duncan Smith]

I agree. These individuals, Abramovich and others, may want this to be done, but somebody has to do it for them, and my hon. Friend is absolutely right to follow the chain down, because we have to capture all the individuals down the chain, not just the one at the top. That is the key, because without those, this does not happen. He rightly says that, to avoid the sanctions, three weeks before the war began Abramovich was busy restructuring radically his assets. I believe that my hon. Friend is right to say that between £4 billion and £7 billion was squirreled away as a result, and we were not able to do anything about it. But we should have been ahead of the game on that one.

[Dame Margaret Hodge]

The right hon. Gentleman is making an excellent contribution. I want to say one thing: I do not think the Government are using their current powers as effectively as they could on this issue. Under section 11 of the Sanctions and Anti-Money Laundering Act 2018, the powers can be used against somebody “associated with” the person sanctioned. If that is the case and I have read the legislation right, does he agree that the Government could have stopped Abramovich giving all this to his young children and could have sanctioned them because they were associated with Abramovich himself?

Economic Crime (Transparency and Enforcement) Bill

Debate between Iain Duncan Smith and Margaret Hodge

Committee stage
Monday 7th March 2022 Commons Chamber

[Sir Iain Duncan Smith]

It might not, but I think it would, because it covers the information that individuals are asked to declare. It may not cover the sanction on the individual, but it covers the knowledge of who that individual is. If there is a better way to do it, however, I am up for it. That is feasible, and it may be that my right hon. and learned Friend’s way of doing it is a better way.

[Dame Margaret Hodge (Barking) (Lab)]

I think we are all wandering around the same point. May I clarify it? The Minister agreed to look at our amendment 3, which addresses the question of whether this is an entity or an individual, and whether, if it is an entity, that entity can put forward a company provider and thus hide the identity of the owner of the property. The Minister has agreed to look into what could be a loophole in the legislation, and then consult with us on it. I think the point is valid, and I hope that the Minister will look at it and that, between us, we can all close that loophole.

[Sir Iain Duncan Smith]

I agree that clarity is everything in this instance. The Bill will be going to the other place, and by the time it comes back, we will be looking for those loopholes to be shut down and sorted out.

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[Dame Margaret Hodge]

It always seems to me absurd that it costs £12 to establish a new company in Companies House. Obviously we want to make it easy for new businesses to enter the market, but £12 is absurd. We know that that gets exploited in relation to shell companies, but does it also facilitate economic crime? If we quadrupled that figure to £50, it would still not be a fortune, but we would then have a massive investment that we could put into our enforcement agencies without raising any further money through taxation. There are a whole range of mechanisms that would not have a direct impact on public spending. They may mean that the Treasury gets a little bit less than it thought it would, but they would not have a direct impact on public expenditure and we could employ them to make these enforcement agencies fit for purpose.

[Sir Iain Duncan Smith]

I wonder whether the right hon. Lady can see some way forward on a point that I made earlier. Europe, the UK and the USA all have separate sanctioning bodies, with the USA way ahead of the pack. If the USA is sanctioning somebody, it surely should be for this Government, or for that matter for European Governments, to argue why they will not be sanctioning the individual against the evidence that is shared by the USA, rather than why they are looking to sanction the individual here. It seems that, if we are all in this together, it would be far better if we had a much closer set-up, so that we sanctioned people if somebody else had found the evidence and we thought that it was okay.

[Dame Margaret Hodge]

There are already arrangements for the sharing of information and data, but it is not enough. It is absurd. When I talk to the enforcement agencies and the anti-money laundering people working in the banks, they tell me that they cannot share information. If one bank has information that makes it suspicious about a particular client, it ought to be able to share it around the banking system so that they can all take action. There are pragmatic steps that we could take to share information and knowledge across jurisdictions, from America through to Europe to us, which would massively improve things and actually bring in money.

Let me take one example that came out of the FinCEN files. Standard Chartered Bank is a British bank. In 2019, it was fined by both America and ourselves for poor money laundering controls and other offences, including breaching sanctions in Iran. The British bank was fined £842 million in America, but only £102 million here by the Financial Conduct Authority in the UK. The Americans have got it right. There are lessons that we can learn from them. There are also ways in which we could properly resource all the enforcement agencies. We could perhaps reduce them as well—we do not need all these people. Every time I refer a matter, whether it is for a corrupt or an illegal activity, to one enforcement agency, I am either told that it is the responsibility of another agency or it goes into a big black hole and I never see anything arising out of it again. That situation is completely and totally unacceptable.