Economic Crime and Corporate Transparency Bill (Tenth sitting)

Liam Byrne Excerpts

Committee stage
Tuesday 8th November 2022 Public Bill Committees

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a pleasure to serve with you in the Chair, Ms Elliott. When the Minister winds up the debate on the clause, will he say a little more about some of the information that the registrar may be seeking, and in particular whether she is able to solicit information from people seeking to file accounts, and so on, that has been requested by other agencies? All kinds of information is sometimes beyond the purview of, for example, the National Crime Agency, and sometimes the registrar, rather than a police agency, making the first approach may be a more intelligent way to get the information needed for an investigation. It would be helpful if the Minister clarified whether Companies House can act in concert with other law enforcement agencies to gather information that is needed to help to bring prosecutions.

[Kevin Hollinrake]

I am grateful for the right hon. Gentleman’s remarks. The answer is yes, that is exactly what the legislation allows for: the risk-based flow of information between the registrar and law enforcement agencies. Of course, the power will be discretionary, so the registrar will determine when to exercise it, but it can be to request any information that she requires under legislation—both public and private information.

Question put and agreed to.

Clause 80, as amended, accordingly ordered to stand part of the Bill.

Clause 81

Registrar’s notice to resolve inconsistencies

Question proposed, That the clause stand part of the Bill.

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[The Chair]

Sorry, I am getting confused.

[Liam Byrne]

On a point of order, Ms Elliott. I would be really grateful if you could just clarify where we are in the debate.

[The Chair]

We are debating Government amendment 106 to clause 84, with which it is convenient to consider Government new clause 34. It is this light; I am afraid I am reading eights for threes. I am terribly sorry.

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[Dame Margaret Hodge]

The Minister is misinterpreting our approach. I am sorry if he reads it that way, but I agree that we are not asking for 100%. He calls it a risk-based assessment; I call it a risk assessment. Apologies for the difference in language.

[Liam Byrne]

If we were having this debate in my constituency, my constituents would say to me and, indeed, to the Minister, “We want to hire a police officer to stop crime.” If we look at a definition of what a police officer does, they maintain law and order in local areas, prevent crime, reduce fear of crime and improve the quality of life for all citizens. We want Companies House to stop economic crime and that is what my right hon. Friend’s amendments seek to achieve.

[Dame Margaret Hodge]

And presumably the policeman does not knock on every door.

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[Dame Margaret Hodge]

I have to say we disagree, but I will come back to this issue. I think our proposals strengthen the Bill.

I tabled my amendments to clause 88 because I do not support the wording of

“as the registrar considers appropriate”.

I have to say to the Minister that we discovered in this morning’s sitting that the company registrar has so far registered 3,000 properties for a register that has now been in place since August. In three months, she has done 3,000, but there are 138,000 to deal with. At that rate—if she does 12,000 a year—she will be there till doomsday, so putting a little bomb underneath her to ensure that she takes action is important.

[Liam Byrne]

My right hon. Friend is making a brilliant speech. If anything, the Minister has caused more alarm than he might have intended this afternoon by referring to the language in the Bill that says the registrar must take account of the information that she holds. There is no way that we would ask a police officer to police Hodge Hill simply with reference to the information that that police officer happens to hold. We would ask the police officer to look at the crime environment in the constituency as a whole, taking account of all kinds of perspectives, not simply the information that he or she happened to have in their little black book.

[Dame Margaret Hodge]

I will move on to new clause 37, which has the aim of checking that the stated person of significant control really is the person who controls the company. Powers to get information, to reject documents, to require information and to remove documents all sit in the Bill. The new clause would ensure that, through a risk-based assessment—I just reiterate that for the Minister—Companies House would proactively check that the person named as the PSC was the PSC in reality. Current legislation requires the ID verification of a company owner, but not the verification of their status as a company owner, so the risk remains that nominees will continue to be put forward as owners of companies despite the real control being elsewhere. The risk is heightened if the Minister does not move to ensure that company service providers are properly regulated, supervised and vetted before the whole system comes into force.

In the current system, there are endless examples that demonstrate the extent of the problem that the Minister and the Government are trying to tackle—we are trying to contribute to that process. One is the famous dentist in Belgium. From an interrogation of the Companies House register, we know that five beneficial owners control more than 6,000 companies, which is a huge red flag. Some 4,000 of them are under the age of two, and 400,000 companies—almost 10% of the total—still do not declare a person of significant control. We have the Azerbaijan laundromat example, where a lorry driver in Baku was named as the person of significant control and had no idea that kleptocrats from Azerbaijan were taking all the money out of the banks and money laundering it elsewhere.

There is one filing in Companies House for which I thought I would name the person of significant control. The company is called Global Risks Reduction Funding Ltd, and the name is listed as—I will take a deep breath—

“Neutral-Claimant-Federal-Witness-Director-Captain-Postmaster-Bank-Banker-Plenipotentiary-Notary-Judge-Vassalee For The Vessel-Phouthone-Thone: Siharath.”

I do not think anybody has questioned that as the person of significant control. The whole thing is absurd.

An important point for the Minister is that, in 2019, Transparency International did a quick Google search and found 23 active company service providers that were offering the service of nominee persons of significant control—that was one quick search of one directory. When Global Witness undertook research on Scottish limited partnerships, it found that 40% of the beneficial owners of Scottish limited partnerships were either a national of a former Soviet country, or a company incorporated in the former Soviet Union.

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I hope that the Minister will consider the amendments and new clauses in the spirit in which they have been tabled, because they seek to tackle the remaining quite big holes in the Bill. I hope that he takes the sentiment behind them very seriously and I look forward to his response.

[Liam Byrne]

It is a pleasure to speak to new clause 43, which is in my name but has been drafted with the assistance of my right hon. and hon. Friends. In introducing it, I have to think that the Minister is a lucky man, because there are very few opportunities when any of us in this place have the chance to translate a life’s work into the law of the land. Yet that is precisely the opportunity that we have afforded to the Minister, who is steering the Bill so ably through Committee. That is why we are here to help him. The Minister will know that he is living the dream.

I know that the Minister is not insensible to the scale of economic crime in this country or to the threat that it poses, because I was privileged enough to be there in Westminster Abbey just a few months ago, when he got up to speak with his customary eloquence to the launch of the economic crime manifesto. That has been drawn up with input from so many right hon. and hon. Members, and it is the manifesto that declares loud and clear:

“Dirty money is a national security threat…Dirty money causes massive financial damage…Dirty money is damaging the UK’s reputation…Dirty money may be pushing up prices for British citizens…Dirty money undermines the rule of law and democratic institutions.”

The Minister knows what he is talking about when it comes to the Bill, which is why he is stewarding it so ably through Committee. That is why I know that, as a canny captain in his Department, he is alive to all the constructive recommendations that we are making to him, because that that strengthens his hand.

The Minister has obviously got some theatre to perform because he has to get the Bill through the House and then get it through the House of Lords, and then back through the House of Commons. As an experienced and seasoned political operator, he will know that it is really wise to make a few strategic concessions to the Opposition to keep them on side. Although he has not revealed that yet by making us any concessions, it will not be long, and it could be at the conclusion of my speech to new clause 43, because it is a blindingly obvious improvement to a current hole in the Bill.

To make that case, I need to demonstrate three things this afternoon: that use of proxies by bad people is a problem; that use of proxies by bad people is a problem here in our country; and that the Bill is deficient and needs toughening up.

Let me share a few examples of why proxies are such a problem. Where better to start than with exhibit A, Roman Abramovich, who was finally sanctioned earlier this year after a disgraceful period of licence in which he was allowed to do terrible things like buy football clubs? Now he has of course put Chelsea football club into some sort of trust. The money is frozen. He has declared that all net proceeds from the sale will be donated to the victims of the war. Members on both sides will have been as surprised as I was to hear from the Foreign Office Minister this morning at Foreign Office questions that that money has still not been routed to victims of Russia’s barbarity in Ukraine; it is still frozen by red tape and bureaucracy in this country.

That is an outrage, because Roman Abramovich secretly transferred hundreds of millions of pounds in assets, including private jets—including the world’s biggest private jet—to his children just days before he was placed under sanctions. That is not my view; that is the view of the Federal Bureau of Investigation. The oligarch has seven children, aged between eight and 30. He is alleged to have made his offspring the beneficiaries of an offshore trust in Cyprus that controls his assets. That transfer was made in February and included a £282-million Boeing 787 Dreamliner, super yachts and trophy items bought through a network of shell companies, including some in Jersey and the British Virgin Islands: Wotton Overseas Holdings Ltd, Jersey; Clear Skies Flights Ltd, Jersey; and Wenham Overseas Ltd, British Virgin Islands.

All that begins to illustrate how a bad actor has used proxies to circumvent sanctions and sanction controls. The tragedy of course is that it was not Companies House that proactively brought the matter to the House to say, “Here we are, folks. I think we have a bit of a problem”; no, we have to learn about it not from Companies House or a British crime enforcement agency, but from the United States, where the authorities brought an action and forced disclosure of the information in the American courts. That underlines my point that use of proxies is a systemic problem.

I want to go further, however, and to illustrate how the use of proxies is a systemic problem of economic crime here in our country. Who better to illustrate that than Alisher Usmanov? He has strong ties to President Putin and his inner circle. On 22 March this year, it was revealed that Usmanov’s sister, a gynaecologist based in Tashkent, had the beneficial ownership of 27 different Swiss bank accounts with hundreds of millions of dollars in them. In fact, analysis of the suspicious activity reports related to those accounts showed that they had been moving around about $1.6 billion. That was revealed in The Guardian newspaper. His assets include a $600-million super yacht, the Dilbar, an Airbus H175 helicopter and UK properties including Sutton Place, a 16th-century Tudor house in Surrey, which are held through a range of different trusts. He is widely known as someone whom we should be taking far more aggressive action against than we are today.

We then have the case of Dimitry Mazepin. He was —is—the controller of Uralchem and a number of other fertiliser companies on behalf of President Putin and the Russian Government. Among the holding companies in Mazepin’s group is Uralchem Freight, based in Cyprus, which has control of a fertiliser terminal in Latvia. The Latvian press, however, reports that the beneficial owner of that organisation is someone called Aamar Atta Bhidwal. That is the same name as a director of Quest Resources, incorporated at Companies House on 16 July 2021, in Guisborough. The co-director was someone called Gordon Alexander, a director of Hutton Chemicals. Quest is also, we are told, in the beneficial ownership of a company with close association with Mr Mazepin.

Clearly, there is already a risk that UK nationals on the Companies House register can be used as proxies, whether wittingly or unwittingly, by someone who is sanctioned.

[Kevin Hollinrake]

Will the right hon. Gentleman give way?

[Liam Byrne]

I will give way to the Minister, but there is more to come.

[Kevin Hollinrake]

I intervene in the hope that I might abbreviate the debate—I am probably going to fail. Is the right hon. Gentleman aware that it is already the case in law that a share held by a person as a nominee or proxy for another is to be treated as though the share is held by the true owner? Also, in law, failure to declare the true owner is a criminal offence. Is he aware of that?

[Liam Byrne]

Yes, of course, but the Minister must also be aware that the provisions he has sketched into the law have comprehensively failed, as my next example will now prove.

Mazepin was the majority owner of Hitech Grand Prix, and his son was a racing driver. His company, Uralkali, was the sponsor of this company until March 2022. In March of this year, 75% was transferred to a company called Bergton Management Ltd. The shares were not sold; they were relinquished. There does not seem to have been any cash paid out for this major economic interest in a globally significant grand prix company.

From Bergton Management Ltd, the ownership of the assets moved to somebody called Oliver Oakes, who now controls 75% of the shares. He created Uralkali racing in January of this year. In an interview last year, he called Dmitry Mazepin a friend, associate, colleague and manager. I saw from the Companies House register this morning that he created Hitech Global Holdings on 11 March 2022, just three days after Mr Mazepin and his son were sanctioned.

There is a clear risk that oligarchs are using proxies, and that this misbehaviour is washing up on our shores and in Companies House. That leaves us with the third question: whether there is a hole in the Bill here. We need look no further than the evidence that UK Finance provided to the Committee. I said:

“So you would say to Members of Parliament who are worried about bad people transferring control of an economic asset to proxies that, at the moment, we do not have enough safeguards in the Bill.”

The answer came:

“I think they could be improved, yes.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 11, Q10.]

Here is a simple opportunity for the Minister to apply a bit of good old-fashioned belt and braces, make the Opposition happy, keep them on side and ensure that some of his former colleagues who put together the economic crime manifesto are singing his praises wherever they can—accept either the principle or the wording of new clause 43. It asks for nothing more than that any person holding shares in a public company as a nominee for another person must disclose that fact to the register, or face a sanction. That is straightforward, it is not complicated, and it would make a difference.

[Kevin Hollinrake]

I am grateful to the right hon. Gentleman for his kind words. I remember very clearly my speech in Westminster Abbey that night. He might remember that I talked about corporate criminal liability and whistleblower reform, which are absolutely essential. Indeed, at least one of those falls under my portfolio, so I am certainly committed to bringing forward those reforms when I can.

The only difference between hon. Members of the Opposition and ourselves is the means by which we would achieve the same end. On amendments 119 and 120, I am always happy to look at sensible amendments that take us forward. When Opposition Members talk about those cases, they are talking primarily about cases in the past where we did not have the powers that this Bill provides, and where we did not have the level of enforcement; we both agree that that needs improvement.

Where we differ is on how we go about this. I have serious concerns about the provisions in amendment 116, tabled by the right hon. Member for Barking, which seem to require the registrar to look at every single company on the record. That is exactly what it says. It says that the registrar

“must carry out a risk assessment to identify where the information it holds might give rise to a matter of concern.”

The registrar can do that only by looking at every single record.

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The right hon. Member also made the point that journalists draw attention to much of this information. Journalists do a fantastic job—many of the cases that have been referred to today are based on a journalist’s excellent work—but that ability will be enhanced through the extra information that will be provided through the registrar.

[Liam Byrne]

My concern was to ensure that the registrar has a crime-fighting obligation, and that when she conducts her risk assessments, she is not constrained merely to the information that is before her—that which is on the register.

[Kevin Hollinrake]

As the right hon. Member knows, objective 4 establishes exactly that: an obligation

“to minimise the extent to which companies and others carry out unlawful activities, or…facilitate the carrying out by others of unlawful activities.”

That is quite clearly in the Bill.

New clauses 37 and 38 would require the status of a person with significant control and the accounts of dissolved companies to be checked by the registrar. The registrar would be required to carry out a risk assessment of all those companies—roughly 1,000 companies per day. Members might be thinking that every person with significant control has some connection to Russian dirty money or Russian oligarchs, but the vast majority of state-owned enterprises have a person with significant control, because they own more than 25% of those companies. For the registrar to look at 1,000 companies every single day to determine whether there is a risk, and then investigate further—that is exactly what the right hon. Lady’s new clauses would require—would not be practical.

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[The Chair]

The Question is that amendment 119 be made.

[Liam Byrne]

On a point of order, Ms Elliott. Can you clarify the order of consideration for the amendments and new clauses in this group?

[The Chair]

Let me be clear. We are discussing amendment 119 to clause 88. Does the right hon. Member for Barking want to press the amendment to a vote?