Sanctions and Anti-Money Laundering Bill [Lords]

Jo Swinson Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Sir Alan Duncan]

There is an obligation to report, which I will come to in a minute. I would be happy to explain the exact details to the hon. Gentleman, although of course they are still being devised on the back of the obligations laid down in the Bill.

New clause 3 requires reports to be made—this relates to the question that the hon. Gentleman has just asked—about the use of the power to make sanctions regulations, including the specifying of any recommendations made by a parliamentary Committee on the use of that power and the Government’s response. It is right and proper that an independent review of the powers should be carried out by Parliament. This is a strong set of measures to address the Government’s approach to imposing sanctions for human rights abuses, and I would like to put it on record again that the Government are committed to promoting and strengthening universal human rights and holding to account states and individuals who are responsible for the most serious violations.

[Jo Swinson (East Dunbartonshire) (LD)]

Will the Minister outline how he envisages such a parliamentary review operating? Will it be done through specific Committees, or on the Floor of the House? Will we be able to have confidence that that procedure is robust enough to ensure that the review is appropriate?

[Sir Alan Duncan]

The hon. Lady hits on a point that illustrates the important distinction between the Executive and the legislature, even though the Executive are drawn from the legislature. We, as Ministers, are the Executive. The hon. Lady is a Member of the legislature. I will not say, “Long may that continue”, but it might. It is therefore inappropriate for us to determine in primary legislation exactly how the House should go about its business. That is for the House itself to decide. We believe that we have included in the Bill the proper impetus for the House to be able to structure itself as it wishes—through the Joint Committee on Human Rights or the Foreign Affairs Committee, for example—while saying in advance that we as the Executive will have an obligation to report back and respond to any such independent activity.

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[Sir Henry Bellingham]

I declare an interest as the chairman of the all-party group on the British Virgin Islands and as a former Minister for the overseas territories. I had the pleasure of visiting all but two of them during my time in office.

It is a pleasure to follow the hon. Member for Glasgow Central (Alison Thewliss). She said that not enough progress has been made, but I disagree. I think a lot of progress has been made, and I will come on to that in a moment. We are all of the same view, however, about the problem that exists, which was so eloquently outlined by the right hon. Member for Barking (Dame Margaret Hodge) and my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). No one can disagree with what they said or about the scale of the problem; it is just a question of how we attack and deal with this problem.

When I was a Minister, I came across a number of examples of straightforward pilfering by different parties in African countries. One that my right hon. Friend and I dealt with, when he was the Secretary of State for International Development and I was the Minister for Africa, involved the Democratic Republic of the Congo, where a company called Tullow had its licence expropriated, completely unreasonably, by the DRC Government. It transpired that, after it was expropriated, it was handed over to a nephew, I think, of President Kabila and to a relative of President Zuma, while the company receiving the assets was registered in the BVI.

We know exactly what the problem is, but the question is how we should go about dealing with it. In many ways, I am disappointed with the Government. I feel that they should have tabled their new clause a bit earlier and made the arguments for it and that they should very much have stuck to their ground, but we must now move forward.

As far as the economies of those territories are concerned, unless people have had the chance to go there, it is difficult fully to understand the extent to which some of them have become dependent on international financial services—in the Caymans, it is obviously banking; in the BVI, it is international corporate registrations. They are extremely successful economies, with a very large number of professional service jobs clustering around their business model. I agree entirely with my right hon. Friend when he said that they can compete in other areas, such as tax and efficiency, as well as looking after the clients, and I hope that many parts of those professional and service businesses can expand, but there will be a disruption to their business model in the short term.

I am concerned that the Foreign and Commonwealth Office will be required to work incredibly closely with the Governments of those territories—particularly those of the BVI and the Cayman Islands, and to some extent those of the Turks and Caicos Islands and Bermuda—to make sure that, over the next few years, it puts in a huge amount of effort, knowledge sharing and capacity building.

My right hon. Friend will be more aware than anyone that, under the International Development Act 2002, the Department for International Development is the first port of call for financial assistance when something goes wrong in the territories. He and I obviously remember what happened in Montserrat, when DFID quite rightly came to the rescue, and when the Government of the Turks and Caicos Islands in effect went bust, DFID came up with a very large loan. That is why it is incredibly important that successful economies, such as that of the BVI, can transition to the new world in which they are going to have to live.

I would not have supported my right hon. Friend’s new clause 6. He asked me to support it, and I thought long and hard about it. In many ways, I would like to have done so, but I was very concerned about it for a few reasons, the first of which involves the constitution. As the hon. Member for Bishop Auckland (Helen Goodman) pointed out, I was the Minister responsible for the overseas territories White Paper in 2012, into which DFID had a significant input, as indeed did the Department for Environment, Food and Rural Affairs.

My right hon. Friend the Member for Newbury (Richard Benyon) assisted in that part of the White Paper that looked at international obligations on biodiversity and so on. The White Paper said that the UK Government could and would legislate in extreme circumstances, and that was a given because the territories are our responsibility. The citizens of those territories are as British as we are, and we have the ultimate responsibility for them. In some circumstances, we would of course legislate, and we reserved the right to do so. But the White Paper, and all the discussions and promotion on it, made it clear that that would always be a last resort, and in every circumstance we would try to build consensus and work in partnership with the territories.

France has a different model, with some of its territories incorporated into La France and with representatives in the Assemblée Nationale. We have moved to a model of home rule that is different in every case. Every territory has a different constitution and a different type of home rule, and we must work now to try to build consensus. I sincerely hope that the nuclear option contained in new clause 6 of Orders in Council will not be needed. We will have to work hard to make sure that we make progress in terms of what is outlined in the new clause. If we do not, I foresee a serious stand-off with at least three of the territories. I also fear for the economies of the territories if change happens very quickly and they have a significant loss of income. How will they transition and build up tourism, for example, or agriculture, where the BVI is very far behind?

I am concerned also that those territories have nascent independence movements and they will look at what has been said in the House today and say, “Well, if Britain is not prepared to work with us on a consensual basis, why should we remain in the British family?” I will do all I can to dissuade them from that course of action. Over the next two or three years, I hope that Ministers will have many discussions and make a generous offer of assistance, so that we can make progress in the right way.

[Jo Swinson]

The hon. Gentleman says that we need consensus and to try to work with the overseas territories. I would gently point out that the UK has been showing leadership on this issue since the international summit in 2013. Why does he think the overseas territories have engaged so little on this agenda, and why is he optimistic about success without the type of measure that the House will agree today, given that the Government have been making the case for five years?

[Sir Henry Bellingham]

I understand the hon. Lady’s point, but I would point out that some of us worked extremely hard to build up to the exchange of notes in 2016, so that our law enforcement agencies can access key information from, for example, the BVI within a matter of hours and use it in various measures they take against serious organised crime, money laundering, international slavery and the expropriation of assets—[Interruption.] I hope that it is someone important. On 70 occasions, the law enforcement agencies have been able to move against unsavoury people and get results.

If we move too quickly and without a decent transition, many of the corporate registrations will not stay in the BVI, the Cayman Islands, the Turks and Caicos Islands, Anguilla and so on: they will move to places such as Delaware, Panama, Venezuela, Nebraska and Equatorial Guinea—which my right hon. Friend the Member for Sutton Coldfield and I know well, as we have both visited it. Unless we are incredibly careful, that displacement will take place and, as the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) pointed out, it will take place to the Crown dependencies.

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[Mr Speaker]

Order. I want to call several more colleagues and therefore there is a premium upon brevity.

[Jo Swinson]

Having listened to various hon. Members refer to the excellent briefing by Transparency International UK, I should declare an interest, as I am married to its director of policy—the briefings really are excellent.

Turning first to the Magnitsky amendments, I welcome Government amendments 10 and 13, which reflect the Prime Minister’s commitment of 14 March. After Second Reading, many of us felt rather less confident than previously that they would be forthcoming, so I am glad that the Government have brought them forward, given that the issue has been raised repeatedly. I am particularly reassured by the Minister’s confirmation that the lists of people sanctioned will be put in the public domain for anybody to see. I agree with others that that is a very important deterrent.

The importance of human rights and the part that our country plays in upholding them internationally cannot be overstated—they are vital. The hon. Member for Glasgow Central (Alison Thewliss) set out the horrendous case of Sergei Magnitsky and the horrendous lengths to which oligarchs will go to protect their ill-gotten gains. I was reminded, on the wider issue of corruption, that we are talking about not just numbers on spreadsheets, but people’s lives—this is literally a life and death matter. I recall planning a visit to Russia to investigate human rights abuses in Chechnya. We had to postpone the visit because the individual we had been organising it with, Natalya Estemirova, who was from a human rights organisation, was assassinated.

That followed the murder of the journalist Anna Politkovskaya, and last October we were shocked by the murder in Malta of the investigative reporter Daphne Caruana Galizia. These people were murdered for investigating and exposing corruption and human rights abuses. I was particularly pleased to see the launch of the Daphne project in tribute to Daphne, with 45 reporters from 15 countries carrying on her work so that her stories will live on. One of the most powerful ways to send a message to anyone who would seek to silence those trying to uncover corruption is to make sure that what they were uncovering is finally exposed.

The Minister mentioned the consultation that was launched yesterday on Scottish limited partnerships. The very real problems that have arisen under those partnerships have been in the public domain for more than 18 months, and given that we as a country have been trying to lead on this in recent years, we need to be moving with much more alacrity. The hon. Member for Glasgow North East (Mr Sweeney) made an incredibly important point about enforcement. We need to ramp up Companies House’s ability to investigate, and that requires resources. Very good people there are trying to do a very good job, but given that 17,000 Scottish limited partnerships were registered to just 10 addresses, there are questions to be asked about how risk-based investigation and digital tools could be improved.

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[Hannah Bardell]

Does the hon. Lady agree that it is disappointing to hear Conservatives saying that the money will move elsewhere? If we do not make a start, how will we move forward? The gender pay gap reporting has done exactly that.

[Jo Swinson]

I concur absolutely. The fact that we cannot solve this problem in every single jurisdiction in the world does not mean we should not do what we can in those areas where we can have influence. We should certainly be using our diplomatic influence to try to expand the use of public registers in other countries, but we should also be setting our own house in order, because if we do so, we will have more legitimacy and credibility when we urge other countries to follow suit.

The United Kingdom is trying to take a leadership role on this issue, and that is important. That dates back to 2013, when the then Prime Minister, David Cameron, set out the Government’s plans at the G8 summit and was aiming to secure international agreement through the anti-corruption plan. I was delighted to play a role as a Minister in the introduction of measures on beneficial ownership and the public register in this country through the Small Business, Enterprise and Employment Act 2015. There was also an anti-corruption summit in 2016. However, there has been delay since then. At that time, the Government committed themselves to legislate to increase transparency in the housing market and to require overseas companies that owned property to declare their beneficial ownership publicly. That was supposed to be in place by April, but now it, too, has been delayed. We will not see even a draft Bill until the summer, and we will not get the actual legislation until next year.

The issue of the overseas territories really matters. More than three quarters of corruption cases involving property that were investigated by the Met’s proceeds of corruption unit involved anonymous companies based in secrecy jurisdictions, and nearly four fifths of those were registered in either the overseas territories or the Crown dependencies. As I have said, it is important that we get our house in order. Conservative Members have said we should try to do that through consensus but, as I pointed out in an intervention, the Government have been attempting to do that with various levels of enthusiasm over the last five years yet the registers have remained firmly private.

What we are talking about is an international crime. It is not victimless. We are talking about corruption that has a very serious impact on vulnerable people in countries throughout the world. Money is siphoned off through corrupt means and denied to the populations of those countries when it should be funding public services and enabling individuals to be looked after. That has an impact on the UK’s own reputation as well.

It is worth recognising the significant role of the overseas territories. In the Panama papers, the British Virgin Islands was the most popular tax haven mentioned, and Bermuda is No. 1 on Oxfam’s list of worst corporate tax havens. That is why it is important that we act. The right hon. Member for Sutton Coldfield rightly explained the challenges involved in including the Crown dependencies under new clause 6 and the specific relationship levers that we have as a country. Nevertheless, I hope that, having accepted the new clause, the Government will be enthusiastic about pursuing the same issues with the Crown dependencies to ensure that they follow suit. They should definitely be required to publish such a register so that the UK can show global leadership on this issue.

[Richard Benyon (Newbury) (Con)]

My experience of the House leads me to conclude that when somebody pays a Member a compliment, they should bank it and move on. However, although I am grateful to the Minister and the hon. Member for Bishop Auckland (Helen Goodman), it is important to say that a lot of people have worked on the Magnitsky amendment or law, as it has come to be known, many of whom sit on the opposite side of the House. Many of them have also been involved in this matter for a lot longer than I have, but I do stand to speak in support of new clause 3.

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[Jo Swinson]

I rise to speak briefly in support of various amendments, including amendment 21, which would remove the Henry VIII powers. It has become an unfortunate hallmark of this Government that they have sought to put far too much power in Ministers’ hands. If anything, the whole “take back control” thing should be in the direction of Parliament and the representatives of the people, not to Ministers, with decisions therefore undergoing less scrutiny. I very much support amendment 21 on that basis.

I am sure that shortly the House will hear from the hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle), who tabled new clause 18, which I very much support. I understand that my support was communicated to the Public Bill Office, but unfortunately my name was not added to the amendment paper. I wanted to put on record the fact that that communication had been sent. My right hon. Friend the Member for Twickenham (Sir Vince Cable) advocated the change in the new clause during our time in coalition, but it was one of those things that was blocked by our coalition partners, who claimed that it would somehow add to regulatory burdens and so would not be possible. I am delighted to support that new clause today.

On new clause 12, which was tabled by the hon. Members for Oxford East (Anneliese Dodds) and for Bishop Auckland (Helen Goodman), it is absolutely sensible that, just as we have a public register of beneficial ownership for companies, the same requirements should apply to trusts, given that we know how often trusts are used in a way that is conducive to money laundering. I understand that there are concerns about some individuals who may be vulnerable, but a better way to deal with that would be to carve out specific exemptions for such individuals, rather than go in the other direction, with the assumption being secrecy. It is about what the default is, and transparency very much ought to be the default, particularly given the widespread evidence of the use of trusts for the sheltering of wealth and therefore as cover for shady activities.

Finally, I wish to talk about the Companies House issues raised by new clause 13, because I was formerly the Minister in charge of Companies House, which tries to do a good job, albeit not with significant resources. Some of the changes that have come in—such as the move to do much more online, thereby getting rid of the paper trail caused by requiring every single company registration to be sent in on paper—are positive and often work well. I speak as somebody who used the Companies House service to set up a company when I was out of Parliament.

I wish to see the process remain simple, straightforward and low cost so that it is easy for people to set up new companies. However, it strikes me that, in that move to online, we have opportunities to undertake many more checks in a more cost-effective way than would have been possible under the paper-based system that existed before. As the hon. Member for Oxford East pointed out, we can have innovations such as drop-down menus which we are familiar with on so many different websites that we interact with in other spheres of life. We can therefore design into the system many of the checks that need to be done.

For addresses to be entered, we could have a simple checking process against the postcode address file. Anyone in this Chamber who does online shopping—I confess that I have, on occasion, done it myself—knows that it is just not possible to enter an address that is not a straightforwardly understood UK address, which is part of the postcode address file. There are therefore lots of good opportunities for Companies House to update its system so that it is much more adept—still in a cost-effective way—at identifying the small proportion of registrations, out of the large number of companies that register with Companies House, that require enforcement activity. Being able to do that in a risk-averse manner, as well as, no doubt, dealing with other patterns of registrations that might end up needing to be investigated would certainly be helpful. Over time, no doubt, tools could be developed to improve the risk assessment process.

[Maria Caulfield (Lewes) (Con)]

The hon. Lady is making some good points. Currently, companies have to pay a nominal fee to register. On the types of registration that she is talking about and the in-depth detail that will need to be considered, has she done any work on the sort of fee that companies will be looking to pay?

[Jo Swinson]

I welcome the hon. Lady’s intervention. Basically, I am talking about making changes to the system in a cost-effective way. We are talking about system changes to multiple transactions, which, as I have said, are hardly groundbreaking in terms of online systems that exist in other spheres. I am talking about having access to these databases that already exist. Over time, intelligence-led risk profiling would also make sense. It is not about saying that for every company registration there needs to be an incredibly cumbersome process; it is about saying that measures could be taken in a fairly cost-effective way to use the technology and the ability that we now have—while things are being registered online—to identify where the problems are, in much the same way that when we enter a company name with one of those 135 sensitive words, a flag goes up, and it will be looked at by some human eyes. We could certainly have that system in place with a wider set of parameters without impinging on the general efficiency of the system, which no Member would want.

[Will Quince (Colchester) (Con)]

rose—

[Jo Swinson]

I am finishing my remarks shortly, but I will certainly give way.

[Will Quince]

The hon. Lady is very kind in giving way. I have a very quick question for her. She rightly answers the question from my hon. Friend the Member for Lewes (Maria Caulfield) about the process and, potentially, adding additional cost. The hon. Lady probably did it herself but many people use intermediaries—be it solicitors, accountants or other individuals and businesses that do it for them. Does she foresee additional cost being created because of the additional administration involved?

[Jo Swinson]

What we are discussing here is having additional checks at the Companies House end. For other organisations, some additional checks already happen. The hon. Gentleman is right that I did do a bit of a test run to check what I had said about it being straightforward. Happily, it generally was fairly straight- forward and an easy system to use. None the less, I think that there would be a way we could use new technology to improve enforcement work through the Companies House website. Additional resources will be needed if we are to take this seriously, and I hope that the Government will recognise that in their response.

[Lloyd Russell-Moyle]

For £12, disreputable individuals can register UK companies and begin trading arms internationally through a network of subsidiaries. For £12, they receive the legitimacy of a trading company and a respectable business. We know that this is the case because it has been happening for 10 years, and it could well be happening right now.

We know that this has been happening thanks to the investigative work of Amnesty International and other non-governmental organisations. In 2014, Ukranian-based S-Profit Ltd, which was registered here in the UK, was named by the South Sudanese Government as brokering a £44 million small arms deal. The South Sudanese Government are subject to sanctions; yet, astonishingly, S-Profit Ltd is still a registered British company.

In 2009, the Committees on Arms Export Controls found that a company called Hazel UK had been brokering arms to Libya, Syria and Sri Lanka, which violated sanctions against those countries at the time. This company is still registered. I could go on. For example, System Use Contract Ltd brokered arms to Rwanda. I have a long list.

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[Sir Alan Duncan]

I salute them for all their efforts.

On what my hon. Friend the Member for Banbury (Victoria Prentis) said about the overseas territories, I am grateful that, in response to the point of order made by my hon. and learned Friend the Member for Torridge and West Devon (Mr Cox), Mr Speaker made it absolutely clear that procedurally the Government’s proposed amendments were in order. The compromise amendment was tabled rather late in the day, but it was not out of order for being late. We fully recognise that the Speaker has the discretion to select or not to select an amendment for debate. We were obviously disappointed that the compromise amendment was not selected, but we respect Mr Speaker’s decision.

[Jo Swinson]

Will the Minister give way?

[Sir Alan Duncan]

I am very short of time. Does the shadow Minister wish to speak?