Sanctions and Anti-Money Laundering Bill [Lords] (Sixth sitting)

Debate between John Glen and Alex Norris

Tuesday 6th March 2018 Public Bill Committees

[The Economic Secretary to the Treasury (John Glen)]

May I say what a pleasure it is to serve under your chairmanship once again, Dame Cheryl? I acknowledge that the amendment seeks to set in legislation an obligation on the Government to implement, within 12 months of Royal Assent, our commitment to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or who bid on UK central Government contracts. It puts an accelerated timetable on something that the Government are doing anyway. In the next few minutes, I will remind the Committee of the timetable to which the Government are committed for delivery of this policy. I will set out the challenges and complexities of the policy and demonstrate why setting an early and artificial deadline for implementation would inadvertently undermine its aims. I know that these are supported across the House, so it is important to ensure that we get the detail of the policy right.

In listening to the remarks made by the hon. Member for Bishop Auckland, I acknowledge the frustration around this; but this Government are committed to continue to lead by example and improve corporate transparency. Over the past five years, the reforms delivered by the Department for Business, Energy and Industrial Strategy have made the UK a global leader on corporate transparency issues. We were the first country in the G20 to establish a fully and publicly accessible company beneficial ownership register and, across the world, non-governmental organisations lobby their Governments to follow the UK example. There is a reason we have that world-leading reputation: it is because of the quality of the measures we have passed and it is a reputation we would lose if this measure were accepted. A 12-month timetable to draft and pass primary and secondary legislation, empower the responsible agencies and commence the obligations is not realistic. The rush to meet such an unrealistic deadline would inevitably lead to loopholes that would be readily exploited by those seeking to evade the new requirements.

[Alex Norris]

We are not just talking about a 12-month timetable; this was first announced by a Conservative Prime Minister in 2015. What have Ministers been doing since then?

[John Glen]

I will come on to explain the history of this and why we are where we are. I am happy for the hon. Gentleman to intervene if he does not feel satisfied at the end of that.

Mindful that the eyes of the world are on us, hon. Members should recognise that this legislation would be a world first. Successful delivery raises significant challenges and it is right that the Government achieve the right balance in an effective regime with robust enforcement that does not have a negative impact on land registration processes across the UK. I acknowledge that some have accused the Government—and we have also been accused this afternoon—of not acting swiftly enough to implement this policy. Let me address those concerns.

We have committed to publishing a draft Bill before the summer to introduce the Bill early in the second Session and for the register to be operational in 2021. Publishing a Bill in draft is the right approach. As I said before, this register will be the first of its kind in the world, it will affect people’s property rights, including not just new purchasers but existing owners. This is a sensitive and delicate area. Getting it wrong would have significant adverse consequences.

[John Glen]

I am not familiar with that particular map but I would be very happy to examine it. For clarity, and addressing the hon. Lady’s previous point, the register will capture the details of beneficial owners of all non-UK companies—including those in the overseas territories—that own UK property. This will be a world first, so we are moving as fast as possible, ensuring that the register is as comprehensive as possible.

As the Government set out in last year’s call for evidence, for the register to be effective the sanctions to be applied for non-compliance must be a meaningful deterrent. Enforcement must be energetic. Simple criminal sanctions may not be sufficient in isolation. The draft Bill will include enforcement through land registration law. Where an overseas entity buys property, it will never be able to obtain legal title to that property without having complied with the register’s requirements. Similarly, a restriction on the title register for property owned by an overseas entity will signal to third parties that the overseas entity must comply with the regime before selling the property, creating a long lease or legal charge. Those are significant steps on which it is right to consult.

Hon. Members will recognise that there are separate Land Registries in Scotland and Northern Ireland, as well as the Land Registry for England and Wales. The approaches taken to land registration and overseas entities by each of those Land Registries have been different until now. That too will need be streamlined. Delivery of an holistic outcome that complements all three land registration regimes is an exercise touching multiple teams across Government and the Land Registries. Put simply, it is an exercise that will take time to get right and a further demonstration of why publishing the legislation in draft is the appropriate next step if we are to get it right. Although I appreciate that the motive underlying the new clause supports the policy as a whole and demonstrates a desire for early delivery and implementation, it does not take account of the complexities that I have set out or the challenges of delivery and implementation.

The register will further demonstrate the Government’s commitment to combating money laundering through the property market. Hon. Members will have seen recent press reports—the hon. Member for Bishop Auckland drew our attention to the splash on 3 February—that two unexplained wealth orders have been obtained by the National Crime Agency in connection with two properties worth £22 million.

Those are the first orders obtained under the relevant powers conferred by the Criminal Finances Act 2017, which commenced at the end of January. They were obtained only a few days after it came into effect. As the Minister for Security and Economic Crime has said, the orders are an important addition to the UK’s ability to tackle illicit finance, and it is great to see them already in use.

The Government will continue to take action. BEIS’s response to last year’s call for evidence will be published shortly, and it will set out the Government’s approach to areas of particular complexity. BEIS has already made significant progress in preparing draft legislation; the work with the office of the parliamentary counsel to draft the Bill is under way.

Separately, BEIS is working to quantify the impact of the legislation on the UK. The impact assessment will quantify the register’s potential impact on the property market and investment flows, around which foreign direct investment is very specific, to pick up on the point made by the hon. Member for Bishop Auckland. The register will rightly make the UK more hostile to illicit flows of money, but we must understand the potential impact of legitimate inward investment.

All those issues were considered in last year’s call for evidence. Scrutiny of the draft Bill will further stress-test whether it will be effective. I hope that that process demonstrates the Government’s continued commitment to enact the policy, and our commitment to get it right. For those reasons, I hope that the hon. Lady will withdraw the new clause.

[Alex Norris]

rose—

Sanctions and Anti-Money Laundering Bill [ Lords ] (Sixth sitting)

Debate between John Glen and Alex Norris

Tuesday 6th March 2018 Public Bill Committees

[The Economic Secretary to the Treasury (John Glen)]

May I say what a pleasure it is to serve under your chairmanship once again, Dame Cheryl? I acknowledge that the amendment seeks to set in legislation an obligation on the Government to implement, within 12 months of Royal Assent, our commitment to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or who bid on UK central Government contracts. It puts an accelerated timetable on something that the Government are doing anyway. In the next few minutes, I will remind the Committee of the timetable to which the Government are committed for delivery of this policy. I will set out the challenges and complexities of the policy and demonstrate why setting an early and artificial deadline for implementation would inadvertently undermine its aims. I know that these are supported across the House, so it is important to ensure that we get the detail of the policy right.

In listening to the remarks made by the hon. Member for Bishop Auckland, I acknowledge the frustration around this; but this Government are committed to continue to lead by example and improve corporate transparency. Over the past five years, the reforms delivered by the Department for Business, Energy and Industrial Strategy have made the UK a global leader on corporate transparency issues. We were the first country in the G20 to establish a fully and publicly accessible company beneficial ownership register and, across the world, non-governmental organisations lobby their Governments to follow the UK example. There is a reason we have that world-leading reputation: it is because of the quality of the measures we have passed and it is a reputation we would lose if this measure were accepted. A 12-month timetable to draft and pass primary and secondary legislation, empower the responsible agencies and commence the obligations is not realistic. The rush to meet such an unrealistic deadline would inevitably lead to loopholes that would be readily exploited by those seeking to evade the new requirements.

[Alex Norris]

We are not just talking about a 12-month timetable; this was first announced by a Conservative Prime Minister in 2015. What have Ministers been doing since then?

[John Glen]

I will come on to explain the history of this and why we are where we are. I am happy for the hon. Gentleman to intervene if he does not feel satisfied at the end of that.

Mindful that the eyes of the world are on us, hon. Members should recognise that this legislation would be a world first. Successful delivery raises significant challenges and it is right that the Government achieve the right balance in an effective regime with robust enforcement that does not have a negative impact on land registration processes across the UK. I acknowledge that some have accused the Government—and we have also been accused this afternoon—of not acting swiftly enough to implement this policy. Let me address those concerns.

We have committed to publishing a draft Bill before the summer to introduce the Bill early in the second Session and for the register to be operational in 2021. Publishing a Bill in draft is the right approach. As I said before, this register will be the first of its kind in the world, and it will affect people’s property rights, including not just new purchasers but existing owners. This is a sensitive and delicate area. Getting it wrong would have significant adverse consequences.

[John Glen]

I am not familiar with that particular map but I would be very happy to examine it. For clarity, and addressing the hon. Lady’s previous point, the register will capture the details of beneficial owners of all non-UK companies—including those in the overseas territories—that own UK property. This will be a world first, so we are moving as fast as possible, while ensuring that the register is as comprehensive as possible.

As the Government set out in last year’s call for evidence, for the register to be effective the sanctions to be applied for non-compliance must be a meaningful deterrent. Enforcement must be energetic. Simple criminal sanctions may not be sufficient in isolation. The draft Bill will include enforcement through land registration law. Where an overseas entity buys property, it will never be able to obtain legal title to that property without having complied with the register’s requirements. Similarly, a restriction on the title register for property owned by an overseas entity will signal to third parties that the overseas entity must comply with the regime before selling the property, creating a long lease or legal charge. Those are significant steps on which it is right to consult.

Hon. Members will recognise that there are separate Land Registries in Scotland and Northern Ireland, as well as the Land Registry for England and Wales. The approaches taken to land registration and overseas entities by each of those Land Registries have been different until now. That too will need be streamlined. Delivery of an holistic outcome that complements all three land registration regimes is an exercise touching multiple teams across Government and the Land Registries. Put simply, it is an exercise that will take time to get right and a further demonstration of why publishing the legislation in draft is the appropriate next step if we are to get it right. Although I appreciate that the motive underlying the new clause supports the policy as a whole and demonstrates a desire for early delivery and implementation, it does not take account of the complexities that I have set out or the challenges of delivery and implementation.

The register will further demonstrate the Government’s commitment to combating money laundering through the property market. Hon. Members will have seen recent press reports—the hon. Member for Bishop Auckland drew our attention to the splash on 3 February—that two unexplained wealth orders have been obtained by the National Crime Agency in connection with two properties worth £22 million.

Those are the first orders obtained under the relevant powers conferred by the Criminal Finances Act 2017, which commenced at the end of January. They were obtained only a few days after it came into effect. As the Minister for Security and Economic Crime has said, the orders are an important addition to the UK’s ability to tackle illicit finance, and it is great to see them already in use.

The Government will continue to take action. BEIS’s response to last year’s call for evidence will be published shortly, and it will set out the Government’s approach to areas of particular complexity. BEIS has already made significant progress in preparing draft legislation; the work with the office of the parliamentary counsel to draft the Bill is under way.

Separately, BEIS is working to quantify the impact of the legislation on the UK. The impact assessment will quantify the register’s potential impact on the property market and investment flows, around which foreign direct investment is very specific, to pick up on the point made by the hon. Member for Bishop Auckland. The register will rightly make the UK more hostile to illicit flows of money, but we must understand the potential impact on legitimate inward investment.

All those issues were considered in last year’s call for evidence. Scrutiny of the draft Bill will further stress-test whether it will be effective. I hope that that process demonstrates the Government’s continued commitment to enact the policy, and our commitment to get it right. For those reasons, I hope that the hon. Lady will withdraw the new clause.

[Alex Norris]

rose—

Sanctions and Anti-Money Laundering Bill [Lords] (Fourth sitting)

Debate between John Glen and Alex Norris

Thursday 1st March 2018 Public Bill Committees

[John Glen]

Absolutely, and that is why it is important that the UK Government act. In June last year, Scottish limited partnerships were brought into the scope of the public register of corporate beneficial ownership maintained by Companies House. That was welcomed by the former Member for Kirkcaldy and Cowdenbeath, who is a leading campaigner on the issue, as was mentioned earlier. He said it was

“the first practical recognition SLPs have been a significant problem”.

That reform further required SLPs to submit an annual confirmation statement that information held on the register is accurate, and to keep the information updated on an ongoing basis. In cases of non-compliance with the duties to deliver information about people with significant control—PSC information—to Companies House and to keep it up to date, officers of Scottish limited partnerships convicted on indictment can face a sentence of up to two years’ imprisonment, a fine, or both.

Additionally, the Department for Business, Energy and Industrial Strategy sought views last year on whether changes need to be made to limited partnership law to further address the concerns that have been raised about misuse of structures, including Scottish limited partnerships. Responses to that call for views are being analysed and options for reform actively considered. BEIS will announce its next steps shortly, and after a response to the call for evidence is published, identified options for reform will be subject to public consultation in the usual way. That process will be used to inform any necessary further reforms to the UK’s treatment of limited partnerships, including Scottish limited partnerships.

I hope that I have addressed in detail the range of concerns about Scottish limited partnerships.

[Alex Norris (Nottingham North) (Lab/Co-op)]

Does the Minister feel that it is possible for just 20 Companies House staff to have oversight of perhaps 400,000 entities under these arrangements?

[John Glen]

I would hope that BEIS will address the issue of what resourcing is necessary to do that sort of work. That will be something that the Department will seek to respond to in the consultation.